REGISTRATION NO. 33-71562
REGISTRATION NO. 811-8148
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 5
(Check appropriate box or boxes)
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Post-Effective Amendment No.5
PAUZE' FUNDS
(Exact Name of Registrant as Specified in Charter)
14340 Torrey Chase Blvd., Ste. 170
Houston, Texas 77014
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code (713) 444-6012
Philip C. Pauze' President
Pauze' Funds
14340 Torrey Chase Blvd. Ste. 170
Houston, Texas 77014
(Name and Address of Agent for Service)
Exhibit Index for exhibits filed herewith is at page of .
---- ----
Approximate date of proposed public offering:
It is proposed that this filing will become effective (check appropriate
box):
/X/ immediately upon filing pursuant to paragraph (b) of Rule 485
on (date) pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a) of Rule 485
on (date) pursuant to paragraph (a) of Rule 485.
The Registrant hereby declares, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, that an indefinite number of shares of beneficial interest,
no par value, is being registered by this Registration Statement. The Rule 24f-2
Notice for the most recent fiscal year, April 30, 1995, was filed on or about
June 28, 1995.
<PAGE>
PAUZE' /SWANSON UNITED SERVICES FUNDS
FORM N-1A
CROSS REFERENCE SHEET
FORM N-1A
PART A CAPTION OR
ITEM NO. LOCATION IN PROSPECTUS
- --------- ----------------------
1 Cover Page
2 Summary of Fees and Expenses
3 Financial Highlights (also covered
under Item 23 in Part B)
4 Cover Page; The Trust; Investment
Objectives and Considerations;
Special Considerations
5 Management of the Fund
6 Cover Page; The Trust;
Dividends and Taxes
7 How to Purchase
Shares; How Shares
Are Valued;
Special
Considerations -
Servicing Fee
8 How to Redeem Shares
9 Not Applicable
FORM N-1A CAPTION OR LOCATION IN
PART B STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION
- --------- ----------------------
10 Cover Page
11 Table of Contents
12 General Information
13 Investment Objectives
and Policies
14 Management of the Trust
15 Principal Holders of Securities
16 Investment Advisory Services
17 Portfolio Transactions
18 General Information
19 Not Covered in
Statement of
Additional
Information
(Covered under
Item 7 in Part A)
20 Tax Status
21 Distribution Plan
(also covered
under Item 5 in
Part A)
22 Calculation of Performance Data
23 Financial Statements (also covered
under Item 3 in Part A)
<PAGE>
PART A -- THE PROSPECTUS
Included herein is the Prospectus for the
Pauze' U.S. Government Total Return Bond Fund
Post-Effective Amendment No. 5
<PAGE>
PAUZE' FUNDS
PAUZE' U.S. GOVERNMENT TOTAL RETURN BOND FUN
P.O. Box 844
Conshohocken, PA 19428-0844
1-800-352-7507
(Information, Shareholder Services and Requests)
PROSPECTUS
February 14, 1996
This prospectus presents information that a prospective investor should
know about the Pauze' U.S. Government Total Return Bond Fund, a no-load mutual
fund (the "Fund") of Pauze' Funds (the "Trust"). Read and retain this prospectus
for future reference.
A Statement of Additional Information dated February 14, 1996, has been
filed with the Securities and Exchange Commission and is incorporated herein by
reference. The Statement is available free from Pauze' Funds upon written
request at the address set forth above or by calling 1-800-352-7507.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
PAGE
Summary of Fees and Expenses
Investment Objectives and Considerations
Special Considerations
12b-1 Fee
Management of the Fund
How to Purchase Shares
How to Redeem Shares
How Shares are Valued
Dividends and Taxes
The Trust
Performance Information
SUMMARY OF FEES AND EXPENSES
The following summary is provided to assist you in understanding the
various costs and expenses a shareholder in the Fund could bear directly and
indirectly.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load None
Redemption Fee None
Account Closing Fee $ 10
ANNUAL FUND OPERATING EXPENSES (as a
percentage of average net assets)(1)
Management and Administrative Services Fees (net
of waivers) .32% (2)
12b-1 Fees (net of waivers) .25% (2)
Other Expenses, including Transfer
Agency and Accounting Services Fees (net of waivers) .93% (2)
Total Fund Operating Expenses (net of waivers) 1.50% (2)
Except for active automatic investment, UGMA/UTMA and retirement accounts,
if an account falls, for any reason other than market fluctuations, below $1,000
at any time during a month, that account will be subject to a small account
charge of $5 for that month. See "Small Accounts" on page .
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A shareholder who requests delivery of redemption proceeds by wire will be
subject to a $10 charge. International wires will be higher.
HYPOTHETICAL EXAMPLE OF EFFECT ON FUND EXPENSES
You would pay the following expenses on a $1,000 investment, assuming 5%
annual return and redemption at the end of each period:
1 year.................................................. $27
3 years................................................. $52
Included in these estimates is the account closing fee of $10 for each
period. This is a flat charge which does not vary with the size of your
investment. Accordingly, for investments larger than $1,000, your total expenses
will be substantially lower in percentage terms than this illustration. The
examples should not be considered a representation of past or future expenses.
Actual expenses may be more or less than those shown.
- --------------------
(1) Annual fund operating expenses are based on the Fund's historical
expenses. Management fees are paid to Pauze', Swanson & Associates Investment
Advisors Inc. d/b/a Pauze' Swanson Capital Management Co. (the "Advisor") for
managing the Fund's investments. Administrative services fees are paid to
Declaration Service Company ("DSC" or "Administrator") for administering the
affairs of the Trust. The Fund incurs other expenses for maintaining shareholder
records, furnishing shareholder statements and reports, and for other services.
Transfer agency and accounting services fees are also paid to DSC, and are not
charged directly to individual shareholder accounts. The Transfer Agent charges
the Fund $18.00 per shareholder account per year with a minimum monthly fee of
$1,500 which increases to $2,000 over a two year period. Prior to February 13,
1996, United Shareholder Services Inc. ("USSI") provided such services and
charged the Fund $25.00 per shareholder account per year, with a minimum monthly
fee of $2,500. The account closing fee and small account charge will be paid by
the shareholder directly to the Transfer Agent which will, in turn, reduce its
charges to the Fund by a like amount. Please refer to the section entitled
"Management of the Fund" at page for further information.
---------
(2) The Advisor, USSI, and their affiliates voluntarily agreed to waive all
fees to the extent necessary to maintain an expense ratio of 1.50% through June
30, 1995. Assuming that fees had not been waived during the period from July 1,
1994 through April 30, 1995, annualized Management and Administrative Services
Fees, 12b-1 Fees, and Other Expenses would have been 0.48%, 0.25%, and .93%
respectively -- for Total Fund Operating Expenses of 1.66%.
FINANCIAL HIGHLIGHTS
PAUZE' U.S. GOVERNMENT TOTAL RETURN BOND FUN
The following per share data and ratios for a share of beneficial interest
outstanding throughout the period from January 10, 1994 (initial public
offering) through June 30, 1994, and the period from July 1, 1994 through April
30, 1995, have been audited by Price Waterhouse LLP, the Fund's Independent
Accountants whose unqualified report thereon is included in the Fund's 1995
Annual Report to Shareholders, which is incorporated by reference into the
Statement of Additional Information ("SAI"). The Financial Highlights should be
read in conjunction with the financial statements and notes thereto included in
the Annual Report. In addition to the data set forth below, further information
about the performance of the Fund is contained in the SAI and Annual Report
which may be obtained without charge.
----------------------
PERIOD ENDED
----------------------
Operating Performance: (A) (B)
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Net Asset Value, beginning of period $ 9.25 $ 10.00
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Net investment income (c) . . . . . .35 .14
Net realized and unrealized
gain (loss) on investments (d) . . . .12 (.75)
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Total from investment operations . . . .47 (.61)
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Less dividends from net investment
income . . . . . . . . . . . . . . . . (.35) (.14)
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Net asset value, end of period . . . . $ 9.37 $ 9.25
====== ======
Total Investment Return (e) . . . . . 5.21% (6.11)%
Ratio/Supplemental Data:
Net assets, end of period (in
thousands) . . . . . . . . . . . . . . $31,994 $13,661
Ratio of expenses to average net
assets . . . . . . . . . . . . . . . . 1.50%(f)(g) 1.50%(f)(g)
Ratio of net income to average net
assets . . . . . . . . . . . . . . . . 4.87%(f)(g) 4.06%(f)(g)
Portfolio turnover rate . . . . . . . 168.90% 0.00%
(a) For the ten month period ended April 30, 1995.
(b) For the period from January 10, 1994 (date of commencement of operations)
to June 30, 1994.
(c) Net of expense reimbursements and fee waivers of $.02 and $.05 per share
respectively.
(d) Includes the effect of capital share transactions throughout the period.
(e) Total return is not annualized and does not reflect the effect of account
fees.
(f) Annualized; the ratios are not necessarily indicative of twelve months of
operations.
(g) Expense ratio is net of fee waivers. Had such reimbursements not been made,
the annualized expense ratio would have been 1.66% and 3.14%, respectively,
and the net annualized investment income ratio would have been 4.70% and
2.42%, respectively.
INVESTMENT OBJECTIVES AND CONSIDERATIONS
The Fund's investment objective is to achieve a rate of total return
(interest income plus or minus realized and unrealized capital appreciation and
depreciation) above the rate of other funds with similar investment objectives
by investing exclusively in securities backed by the full faith and credit of
the United States Government. There is no assurance that the Fund will be able
to achieve its investment objective.
It is the investment policy of the Fund to invest exclusively in debt
securities that are backed by the full faith and credit of the United States
Government. Eligible securities may be issued by the United States Government or
by an agency of the United States Government provided they are backed by the
full faith and credit of the United States Government. The Fund may also invest
in repurchase agreements collateralized by such securities. Eligible securities
may be of varying maturities, based upon the investment adviser's perception of
market conditions, with no stipulated average maturity or duration.
The United States Government's guarantee of ultimate payment of principal
and timely payment of interest of the United States Government securities owned
by the Fund does not imply that the Fund's shares are guaranteed or that the
price of the Fund's shares will not fluctuate.
Neither the investment objective nor the investment policy are fundamental
policies and may be changed by the Board of Trustees without shareholder
approval. However, shareholders will be notified in writing at least 30 days
prior to any material change to either the Fund's investment objective or its
investment policy.
PORTFOLIO SECURITIES
The investment adviser will seek above average total return by
restructuring the average duration of the Fund's portfolio securities to take
advantage of anticipated changes in interest rates. When the investment adviser
believes that interest rates will fall, it will lengthen the average duration of
the Fund's portfolio securities to earn greater capital appreciation. When the
investment adviser believes that interest rates will rise, it will shorten the
average duration of the Fund's portfolio securities to reduce capital
depreciation and preserve capital.
The Fund's success at achieving its investment objective is dependent upon
the investment adviser correctly forecasting future changes in interest rates.
The investment adviser uses extensive fundamental and technical analysis to
formulate interest rate forecasts. However, there is no assurance that the
investment adviser will successfully forecast interest rates and, if its
forecasts are wrong, the Fund may suffer a loss of principal or fail to fully
participate in capital appreciation.
United States Treasury securities are backed by the full faith and credit
of the United States Government. These securities differ only in their interest
rates, maturities, timing of interest payments, and times of issuance. Treasury
bills have initial maturities of one year, do not make semi-annual interest
payments, and are purchased or sold at a discount from their face value;
Treasury notes have initial maturities of one to ten years and pay interest
semiannually; and Treasury bonds generally have initial maturities of greater
than ten years and pay interest semi-annually.
Among the bonds that may be purchased are GNMA Certificates (popularly
called "Ginnie Maes"). Ginnie Maes are backed by the full faith and credit of
the United States Government. Ginnie Maes are mortgage-backed securities
representing part ownership of a pool of mortgage loans which are insured by the
Federal Housing Administration or Farmers' Home Administration or guaranteed by
the Veterans' Administration. The Fund invests in Ginnie Maes of the "fully
modified pass-through" type which are guaranteed as to the timely payment of
principal and interest by the Government National Mortgage Association, a United
States Government corporation. Interest and principal payments (including
prepayments) on the mortgages underlying mortgage-backed securities are passed
through to the holders of the mortgage-backed security. Prepayments occur when a
holder of the mortgage prepays the remaining principal before the mortgage's
scheduled maturity date. As a result of the pass-through of prepayments of
principal on the underlying securities, mortgage-backed securities are often
subject to more rapid prepayments of principal than their stated maturity would
indicate. Because the prepayment characteristics of the underlying securities
vary, it is not possible to predict accurately the realized yield or average
life of a particular issue of pass- through certificates. Prepayments are
important because of their effect on the yield and price of the securities.
During periods of declining interest rates, such prepayments can be expected to
accelerate and the Fund would be required to reinvest the proceeds at the lower
interest rates then available. In addition, prepayments of mortgages which
underlie securities purchased at a premium may not have been fully amortized at
the time the obligation is repaid and may result in a loss. As a result of these
principal payment features, mortgage-backed securities are generally more
volatile investments than other United States Government securities.
The Fund may also invest up to 5% of its assets in bonds that are "zero
coupon" United States Government securities (which have been stripped of their
unmatured interest coupons and receipts) or in certificates representing
undivided interests in stripped United States Government securities and coupons.
The Fund will only invest in "zeros" which are issued by the United States
Treasury and not those issued by broker-dealers or banks. The Fund will not
invest in Interest Only or Principal Only ("IOs" or "POs") mortgage-backed
securities or derivative products. Zero coupon securities tend to be more
sensitive to changes in interest rates than other types of United States
Government securities. As a result, a rise or fall in interest rates will have a
more significant impact on the market value of these securities. Although zero
coupon securities pay no interest to holders prior to maturity, interest on
these securities is accrued as income to the Fund and distributed to its
shareholders. These distributions must be made from the Fund's cash assets, or,
if necessary, from the proceeds of sales of portfolio securities.
REPURCHASE AGREEMENTS
The Fund may invest a portion of its assets in repurchase agreements with
domestic broker-dealers, banks and other financial institutions, provided the
Fund's custodian always has possession of securities serving as collateral or
has evidence of book entry receipt of such securities. In a repurchase
agreement, a fund purchases securities subject to the seller's agreement to
repurchase such securities at a specified time (normally one day) and price. The
repurchase price reflects an agreed-upon interest rate during the time of
investment. All repurchase agreements must be collateralized by United States
Government or government agency securities, the market values of which equal or
exceed 102% of the principal amount of the repurchase obligation. If an
institution enters insolvency proceedings, the resulting delay in liquidation of
securities serving as collateral could cause the fund some loss if the value of
the securities declined prior to liquidation. To minimize the risk of loss, the
Fund will enter into repurchase agreements only with institutions and dealers
which the Board of Trustees considers creditworthy.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend securities to broker-dealers or institutional investors
for their use in connection with short sales, arbitrages and other securities
transactions. The Fund will not lend portfolio securities unless the loan is
secured by collateral (consisting of any combination of cash and United States
Government securities) in an amount at least equal (on a daily mark-to-market
basis) to the current market value of the securities loaned. In the event of a
bankruptcy or breach of agreement by the borrower of the securities, the Fund
could experience delays and costs in recovering the securities loaned. The Fund
will not enter into securities lending agreements unless its custodian
bank/lending agent will fully indemnify the Fund against loss due to borrower
default. The Fund may not lend securities with an aggregate market value of more
than one-third of the Fund's total net assets.
SPECIAL CONSIDERATIONS
INTEREST RATE SENSITIVITY
The investment income of the Fund is based on the income earned on the
securities it holds, less expenses incurred; thus, the Fund's investment income
may be expected to fluctuate in response to changes in such expenses or income.
For example, the investment income of the Fund may be affected if it experiences
a net inflow of new money that is then invested in securities whose yield is
higher or lower than that earned on the then current investments.
Generally, the value of the securities held by the Fund, and thus the net
asset value ("NAV") of the Fund, will rise when interest rates decline.
Conversely, when interest rates rise, the value of fixed income securities, and
thus the NAV per share of the Fund, may be expected to decline. If the Fund
incorrectly forecasts interest rates, both the rate of return and the NAV of the
Fund may be adversely affected. As an example, if the Fund forecasts that
interest rates are generally to go up, shortens the maturities of the
instruments within the Fund and interest rates in fact go down, then the
interest income gained by the Fund will be less than if the Fund had not
shortened its maturities. Additionally, any capital gain that might have been
achieved because of the longer maturities would be less with the shorter
maturities. Additionally, should the Fund incorrectly forecast that interest
rates are generally going down, lengthen its maturities of the instruments
within the Fund and interest rates in fact go up, then the value of the longer
maturities would decline more than those of the shorter maturities. Thus, the
NAV would also decline more. There is no assurance that the Fund will be correct
in its forecast of changes in interest rates nor that the strategies employed by
the Fund to take advantage of changes in the interest rate environment will be
successful in achieving its investment objectives.
BORROWING
The Fund may borrow from a bank up to a limit of 5% of its total assets for
temporary or emergency purposes; and, it may borrow up to 331/3% of its total
assets (reduced by the amount of all liabilities and indebtedness other than
such borrowings) when deemed desirable or appropriate to meet redemption
requests. To the extent that the Fund borrows money prior to selling securities,
the Fund may be leveraged; at such times, the Fund may appreciate or depreciate
in value more rapidly than its benchmark index. The Pauze' U.S. Government Total
Return Bond Fund will repay any money borrowed in excess of 5% of the value of
its total assets prior to purchasing additional portfolio securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Fund may purchase debt obligations on a "when-issued" basis or may
purchase or sell securities for delayed delivery. In when-issued or delayed
delivery transactions, delivery of the securities occurs beyond normal
settlement period, but the Fund would not pay for such securities or start
earning interest on them until they are delivered. However, when the Fund
purchases securities on a when-issued or delayed delivery basis, it immediately
assumes the risks of ownership including the risk of price fluctuation. Failure
to deliver a security purchased on a when-issued basis or delayed delivery basis
may result in a loss or missed opportunity to make an alternative investment.
Depending on market conditions, the Fund's when-issued and delayed delivery
purchase commitments could cause its net asset value per share to be more
volatile, because such securities may increase the amount by which the Fund's
total assets, including the value of when-issued and delayed delivery securities
held by the Fund, exceed its net assets.
12B-1 FEE
The Fund may pay a servicing fee of up to 0.25% of the Fund's average net
assets (1/12 of 0.25% monthly) to persons or institutions for performing certain
servicing functions for Fund shareholders. These fees will be paid periodically
and will generally be based on a percentage of the value of Fund shares held by
the institution's clients. The Fund will pay servicing fees pursuant to a
distribution plan which it has adopted under Rule 12b-1 of the Investment
Company Act of 1940. The distribution plan allows the Fund to pay for or
reimburse expenditures in connection with sales and promotional services related
to the distribution of Fund shares, including personal services provided to
prospective and existing Fund shareholders. See "Distribution Plan" in the
Statement of Additional Information.
MANAGEMENT OF THE FUND
TRUSTEES
The business and affairs of the Fund are managed by the Trust's Board of
Trustees. The Trustees establish policies, as well as review and approve
contracts and their continuance. The Trustees also elect the officers and select
the Trustees to serve as executive and audit committee members.
THE INVESTMENT ADVISOR
Pauze', Swanson & Associates Investment Advisor, Inc. d/b/a Pauze Swanson
Capital Management Co. (the "Advisor"), 14340 Torrey Chase Blvd., Suite 170,
Houston, Texas 77014, under an investment advisory agreement with the Trust
dated November 1, 1993, furnishes investment advice to the Fund. The Advisor is
a Texas corporation which was registered with the Securities and Exchange
Commission as an investment adviser in December 1993. While neither the Advisor
nor Mr. Philip C. Pauze' has served as an investment adviser to other mutua
funds, Mr. Pauze' has specialized in managing portfolios of United State
Government securities for trusts, small institutions, and retirement plans since
1985. Mr. Pauze' assisted the California Funeral Directors Association i
establishing the California Master Trust (the "CMT") and has been its financial
consultant since inception. CMT's investment performance has been highly rated
by independent evaluators. In addition to the CMT, Mr. Pauze' serves as the
financial consultant to the government bond portfolio of the Pennsylvania
Funeral Trust, to the American Funeral Trust, a nationwide funeral trust, and to
the California and Pennsylvania Funeral Directors Association's Retirement
Plans.
The Advisor furnishes an investment program for the Fund, determines,
subject to the overall supervision and review of the Board of Trustees of the
Trust, what investments should be purchased, sold and held, and makes changes on
behalf of the Trust in the investments of the Fund. Mr. Pauze' has been
responsible for the day-to-day management of the Fund's portfolio since
inception.
The Advisory Agreement with the Trust provides for the Fund to pay the
Advisor an annual management fee equal to 0.40% of the Fund's average net assets
(1/12 of 0.40% monthly) on the first $50 million of net assets, and 0.24% of the
Fund's average net assets (1/12 of 0.24% monthly) on net assets in excess of $50
million.
THE ADMINISTRATOR
Declaration Services Company, ("DSC" or "Administrator") P.O. Box 844,
Conshohocken, PA 19428-0844 under an Administration Agreement with the Trust
dated February 13, 1996, generally manages the affairs of the Trust. Terence P.
Smith, President of DSC, has been a Trustee of the Trust since February 13,
1996.
Under the Administration Agreement, the Administrator, subject to the
overall supervision and review of the Board of Trustees of the Trust, supervises
parties (other than the Advisor) providing services to the Trust, provides the
Trust with office space, facilities and business equipment, and provides the
services of executive and clerical personnel for administering the affairs of
the Trust.
The Administration Agreement provides for the Fund to pay the Administrator
an annual fee of $24,000 for the first class of shares, per portfolio; $16,000
for the second class of shares, per portfolio; and, $12,000 for each additional
class, per portfolio.
DSC also provides transfer agency, dividend disbursing and accounting
services to the Funds for which it receives separate compensation.
The Transfer Agency and Shareholder Services Agreement with the Trust
provides for the Trust to pay DSC an annual fee of $18.00 per account with a
minimum annual fee of $18,000 for the first year, $21,000 for the second year
and $24,000 thereafter. Prior to February 13, 1996, the Transfer Agency
Agreement between USSI and the Trust provided for the Fund to pay USSI an annual
fee of $25.00 per account with a minimum annual with a minimum annual fee of
$30,000; and, in connection with obtaining/providing administrative services to
the beneficial owners of Trust shares through broker-dealers which provide such
services and maintain an omnibus account with USSI, the Fund paid to USSI a
monthly fee equal to one-twelfth (1/12) of 12.5 basis points (.00125) of the
value of the shares of the Fund held in accounts at the broker-dealer, which
payment shall not exceed $2.08 multiplied by the average daily number of
accounts holding Trust shares at the broker-dealer.
These fees cover the usual transfer agency functions. In addition, the Fund
bears certain other transfer agent expenses such as the costs of record
retention and postage, plus the telephone and line charges (including the
toll-free 800 service) used by shareholders to contact the transfer agent.
Transfer agent fees and expenses, including reimbursed expenses, are reduced by
the amount of small account charges and account closing fees the transfer agent
is paid.
DSC performs bookkeeping and accounting services, and determines the daily
net asset value for the funds. The Accounting Services Agreement with the Trust
provides for the Trust to pay DSC an annual fee of $22,000 for the first class
of shares, per portfolio; $15,000 for the second class of shares, per portfolio;
and $10,000 for each additional class of shares, per portfolio. Prior to
February 13, 1996, the agreement between the Trust and USSI, bookkeeping and
accounting services were provided to the Fund, with one class of shares, at a
fixed annual fee of $37,500.
On February 13, 1996, pursuant to the Fund's Distribution Plan, the Trust
entered into a Distribution Agreement with Declaration Distributors, Inc.
("DDI"), an affiliate of DSC, pursuant to which DDI has agreed to act as the
Trust's agent in connection with the distribution of Fund shares - - including
acting as agent in states where designated agents are required, reviewing and
filing all advertising and promotional materials and monitoring and reporting to
the Board of Trustees on Trust distribution plans. For such services, DDI will
be paid a fixed annual fee of $20,000 and will be reimbursed for expenses
incurred on behalf of the Trust. The Advisor is committed to pay all sums, if
any, that exceed the amount allowed under the Fund's 12b-1 Plan.
The Trust pays all other expenses for its operations and activities. As the
Trust adds other series in the future, then the Fund will pay its allocable
portion of these expenses. The expenses borne by the Trust include the charges
and expenses of any shareholder servicing agents, custodian fees, legal and
auditors' expenses, brokerage commissions for portfolio transactions, the
advisory fee, extraordinary expenses, expenses of shareholder and trustee
meetings, expenses for preparing, printing and mailing proxy statements, reports
and other communications to shareholders, and expenses of registering and
qualifying shares for sale, among others.
HOW TO PURCHASE SHARES
The minimum initial investment is $1,000. The minimum subsequent investment
is $50. The minimum initial investment for persons enrolled in an automatic
investment plan is $100 and the minimum subsequent investment pursuant to such a
plan is $30 per month per account. There is no minimum purchase for retirement
plan accounts administered by the Administrator or its agents, and there is a
reduced $50 minimum on initial purchases for custodial accounts for minors.
YOU MAY INVEST IN THE FOLLOWING WAYS:
BY MAIL
Send your application and check or money order, made payable to the Fund,
to Declaration Service Company, P.O. Box 844, Philadelphia, Pennsylvania
19428-0844.
When making subsequent investments, enclose your check with the return
remittance portion of the confirmation of your previous investment or indicate
on your check or a separate piece of paper your name, address and account number
and mail to the address set forth above. Third party checks will not be
accepted; and the Trust reserves the right to refuse to accept second party
checks.
BY TELEPHONE
Once your account is open, you may make investments by telephone by calling
1-800-352-7507. The maximum telephone purchase is ten times the value of the
shares owned, calculated at the last available net asset value. Payment for
shares purchased by telephone is due within seven business days after the date
of the transaction. Investments by telephone are not available in any Fund
retirement account administered by the Administrator or its agents.
BY WIRE
You may make your initial or subsequent investments in Pauze' U.S.
Government Total Return Bond Fund by wiring funds. To do so, call the Investor
Information Department at 1-800-352-7507 for a confirmation number and wiring
instructions.
Money should be wired exactly as follows:
Through Federal Reserve Bank-Philadelphia
Account of CoreStates Bank, NA
Philadelphia, PA ABA#031000011
Credit: Declaration Service Company
Account #0105-3323
For the credit: (your name)
(Insert name of Fund)
(Your account number)
(Your account registration)
To assure proper receipt, please be sure your bank included the Fund name
and the account number that has been assigned to you. If your opening a new
account, please complete the Account Registration Form and mail it to the "New
Account" address above after completing your wire arrangement. NOTE: Federal
Funds wire purchase orders will be accepted only when the Fund and Custodian
Bank are open for business.
Funds must be credited to Declaration Service Company's account by 11:00
a.m. (Eastern time) in order to be applied to purchase shares on that day. There
are no wire fees charged by the Fund for purchases of $1,000 or more. A $10 wire
fee will be charged by the Fund on wire purchases of less than $1,000. Your bank
may charge wire fees for this service.
BY AUTOMATIC INVESTMENT PLAN
Once your account is open, you may make investments automatically by
completing the automatic investment plan form authorizing Pauze' Funds to draw
on your bank account regularly by check for as little as $30 a month beginning
within thirty (30) days after the account is opened. You should inquire at your
bank whether it will honor debits through the Automated Clearing House ("ACH")
or, if necessary, preauthorized checks. You may change the date or amount of
your investment any time by written instruction received by Pauze' Funds at
least five business days before the change is to become effective.
ADDITIONAL INFORMATION ABOUT PURCHASES
All purchases of shares are subject to acceptance by the Trust and are not
binding until accepted. Pauze' Funds reserves the right to reject any
application or investment. Orders become effective as of 4:00 p.m., Eastern
time, Monday through Friday, exclusive of business holidays.
Pauze' Funds charges no sales commissions or "loads" of any kind. However
investors may purchase and sell shares through registered broker-dealers who may
charge fees for their services.
If your telephone order to purchase shares is cancelled due to nonpayment
(whether or not your check has been processed by the Fund), you will be
responsible for any loss incurred by the Trust by reason of such cancellation.
If checks are returned unpaid due to nonsufficient funds, stop payment or
other reasons, the Trust will charge $20 and you will be responsible for any
loss incurred by the Trust with respect to cancelling the purchase. To recover
any such loss or charge, the Trust reserves the right, without further notice,
to redeem shares already owned by any purchaser whose order is cancelled and
such a purchaser may be prohibited from placing further orders unless
investments are accompanied by full payment by wire or cashier's check.
Investments paid for by checks drawn on foreign banks may be deferred until
such checks have cleared the normal collection process. In such instances, any
amounts charged to the Trust for collection procedures will be deducted from the
amount invested.
If the Trust incurs a charge for locating a shareholder without a current
address, such charge will be passed through to the shareholder.
TAX IDENTIFICATION NUMBER
The Fund is required by Federal law to withhold and remit to the United
States Treasury a portion of the dividends, capital gains distributions and
proceeds of redemptions paid to any shareholder who fails to furnish the Fund
with a correct taxpayer identification number, who underreports dividend or
interest income or who fails to provide certification of tax identification
number. In order to avoid this withholding requirement, you must certify on your
application, or on a separate W-9 Form supplied by the Transfer Agent, that your
taxpayer identification number is correct and that you are not currently subject
to backup withholding or you are exempt from backup withholding. For
individuals, your taxpayer identification number is your social security number.
Instructions to exchange or transfer shares held in established accounts
will be refused until the certification has been provided. In addition, the Fund
assesses a $50 administrative fee if the taxpayer identification number is not
provided by year end.
CERTIFICATES
When you open your account, Pauze' Funds will send you a confirmation
statement, which will be your evidence that you have opened an account with
Pauze' Funds. The confirmation statement is non-negotiable, so if it is lost or
destroyed, you will not be required to buy a lost instrument bond or be subject
to other expense or trouble, as you would with a negotiable stock certificate.
At your written request, Pauze' Funds will issue negotiable stock certificates.
Unless your shares are purchased with wired funds, a certificate may not be
issued until 15 days have elapsed from the time of purchase, or Pauze' Funds has
satisfactory proof of payment, such as a copy of your cancelled check.
Negotiable certificates will not be issued for fewer than 100 shares.
HOW TO REDEEM SHARES
You may redeem any or all of your shares at will. The Fund redeems shares
at the net asset value next determined after it has received and accepted a
redemption request in proper order. Redemption requests must be received prior
to 4:00 p.m. Eastern time, Monday through Friday, to be effective that day.
BY MAIL
Your written request for redemption in proper form to Declaration Service
Company, P.O. Box 844, Conshohocken, Pennsylvania 19428-0844. For express or
registered mail, send your request to Declaration Service Company, Suite 6160,
555 North Lane, Conshohocken, Pennsylvania 19428. To be in "proper order"
requires delivery to the Transfer Agent of:
(1) a written request for redemption signed by each registered owner
exactly as the shares are registered, the account number and the number of
shares or the dollar amount to be redeemed;
(2) negotiable stock certificates for any shares to be redeemed for which
certificates have been issued;
(3) signature guarantees when required; and
(4) such additional documents as are customarily required to evidence the
authority of persons effecting redemptions on behalf of corporations, executors,
trustees and other fiduciaries. Redemptions will not become effective until all
documents in the form required have been received by the Transfer Agent. (Before
writing, read "Additional Information About Redemptions.")
BY TELEPHONE
Redemptions may be made by telephone, provided you have completed the
Telephone Redemption Authorization section of the purchase application. Upon
proper authority and instruction, redemptions will be wired (for a separate bank
wire charge) to the bank account identified on the account registration or, for
amounts of $15,000 or less, redemptions will be mailed to the address on the
account registration. In connection with telephone redemptions, neither the Fund
nor the Transfer Agent will be responsible for acting upon any instructions
reasonably believed by them to be genuine. The Fund and/or its Transfer Agent
will, however, employ reasonable procedures to confirm that instructions
communicated by telephone are genuine (including requiring some form of personal
identification, providing written confirmations, and tape recording
conversations); and if the Fund or its Transfer Agent do not employ reasonable
procedures, they may be liable for losses due to unauthorized or fraudulent
transactions.
SPECIAL REDEMPTION ARRANGEMENTS
Special arrangements may be made by institutional investors, or on behalf
of accounts established by brokers, advisers, banks or similar institutions, to
have redemption proceeds transferred by wire to pre-established accounts upon
telephone instructions. For further information call the Trust at
1-800-352-7507.
SIGNATURE GUARANTEE
Redemptions in excess of $15,000 currently require a signature guarantee. A
signature guarantee is required for all redemptions, regardless of the amount
involved, when proceeds are to be paid to someone other than the registered
owner of the shares to be redeemed, or if proceeds are to be mailed to an
address other than the registered address of record. A signature guarantee
verifies the authenticity of your signature and the guarantor must be an
eligible guarantor. In order to be eligible, the guarantor must be a participant
in a STAMP program (a Securities Transfer Agents Medallion Program). You may
call the Transfer Agent at 1-800-352- 7507 to determine whether the entity that
will guarantee the signature is an eligible guarantor.
REDEMPTION PROCEEDS MAY BE SENT TO YOU:
BY MAIL
If your redemption check is mailed, it is usually mailed within 48 hours of
receipt of the redemption request; however, the Fund reserves the right to hold
redemption proceeds for up to seven days. If the shares to be redeemed were
purchased by check, the redemption proceeds will not be mailed until the
purchase check has cleared. You may avoid this requirement by investing by bank
wire (Federal funds). Redemption checks may be delayed if you have changed your
address in the last 30 days. Please notify the Fund promptly in writing of any
change of address.
BY WIRE
You may authorize the Fund to transmit redemption proceeds by wire provided
you send written instructions with a signature guarantee at the time of
redemption or have completed the banking information portion of the Telephone
Redemption Authorization on the purchase application. Proceeds from your
redemption will usually be transmitted on the first business day following the
redemption. However, the Trust reserves the right to hold redemptions for up to
seven days. If the shares to be redeemed were purchased by check, the redemption
proceeds will not be wired until the purchase check has cleared, which may take
up to seven days. There is a $10 charge to cover the wire, which is deducted
from redemption proceeds.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS
The redemption price may be more or less than your cost, depending on the
net asset value of the Fund's portfolio next determined after your request is
received.
A request to redeem shares in an IRA or similar retirement account must be
accompanied by an IRS Form W4-P and must state a reason for withdrawal as
specified by the IRS. Proceeds from the redemption of shares from a retirement
account may be subject to withholding tax.
The Trust has the authority to redeem existing accounts and to refuse a
potential account the privilege of having an account in the Trust if the Trust
reasonably determines that the failure to so redeem, or to so prohibit, would
have a material adverse consequence to the Trust and its shareholders.
Excessive short-term trading has an adverse impact on effective portfolio
management as well as upon Fund expenses. The Trust has reserved the right to
refuse investments from shareholders who engage in short-term trading.
ACCOUNT CLOSING FEE
In order to reduce Fund expenses, an account closing fee of $10 will be
assessed to shareholders who redeem all shares in their Fund account and direct
that redemption proceeds be directed to them by mail or wire. The charge is
payable directly to the Fund's Transfer Agent which, in turn, will reduce its
charges to the Fund by an equal amount. The account closing fee does not apply
to exchanges between the Fund and United Services Funds or affiliated funds.
The purpose of the charge is to allocate to redeeming shareholders a more
equitable portion of the Transfer Agent's fee, including the cost of tax
reporting, which is based upon the number of shareholder accounts. When a
shareholder closes an account, the Fund must continue to carry the account on
its books, maintain the account records and complete year-end tax reporting.
With no assets, the account cannot pay its own expenses and imposes an unfair
burden on remaining shareholders.
SMALL ACCOUNTS
Fund accounts which fall, for any reason other than market fluctuations,
below $1,000 at any time during a month will be subject to a small account
charge of $5 for that month which is deducted the next business day. The charge
is payable directly to the Fund's Transfer Agent which, in turn, will reduce its
charges to the Fund by an equal amount. The purpose of the charge is to allocate
the cost of maintaining shareholder accounts more equitably among shareholders.
Active automatic investment plan, UGMA/UTMA, and retirement plan accounts
administered by the Administrator or its agents or its affiliates will not be
subject to the small account charge.
In order to reduce expenses of the Fund, the Trust may redeem all of the
shares in any shareholder account, other than an active automatic investment
plan, UGMA/UTMA and retirement plan accounts, if, for a period of more than
three months, the account has a net value of $500 or less and the reduction in
value is not due to market action. If the Fund elects to close such accounts, it
will notify shareholders whose accounts are below the minimum of its intention
to do so, and will provide those shareholders with an opportunity to increase
their accounts by investing a sufficient amount to bring their accounts up to
the minimum amount within ninety (90) days of the notice. No account closing fee
will be charged to investors whose accounts are closed under the mandatory
redemption provision.
CONFIRMATION STATEMENTS
Shareholders normally will receive a yearly confirmation statement and
after each transaction showing the activity in the account. However, when
account activity is produced solely from dividend reinvestment, confirmation
statements will be mailed only on a monthly basis.
OTHER SERVICES
The Trust has available a number of plans and services to meet the special
needs of certain investors. Plans available include, but are not limited to:
(1) payroll deduction plans, including military allotments;
(2) custodial accounts for minors;
(3) a flexible, systematic withdrawal plan; and
(4) various retirement plans such as IRA, 403(b)(7), 401(k) and
employer-adopted defined benefit and defined contribution plans.
There is an annual charge for each retirement plan fund account with
respect to which the Administrator, acts as custodian. If this charge is not
paid separately prior to the last business day of a calendar year or prior to a
total redemption, it will be deducted from the shareholder's account.
Application forms and brochures describing these plans and services can be
obtained from the Transfer Agent by calling 1- 800-352-7507.
SHAREHOLDER SERVICES
DSC acts as transfer and dividend paying agent for all Fund accounts.
Simply write or call the Investor Information Department at 1-800-352-7507 for
prompt service on any questions about your account.
HOW SHARES ARE VALUED
Shares of the Fund are purchased or redeemed on a continuing basis without
a sales charge at their next determined net asset value per share. The net asset
value per share of the Fund is calculated separately by USSI. Net asset value
per share is determined and orders become effective as of 4:00 p.m., Eastern
time, Monday through Friday, exclusive of business holidays on which the NYSE is
closed, by dividing the aggregate fair value of the Fund's assets, less
liabilities, by the total number of shares outstanding. In the event that the
NYSE and other financial markets close earlier, as on the eve of a holiday, the
net asset value per share will be determined earlier in the day at the close of
trading on the NYSE.
The value of the Fund's assets is determined in accordance with certain
procedures and policies established by the Board of Trustees. All securities
(except securities with less than 60 days to maturity and repurchase agreements)
held by the Fund are valued based on an independent pricing service; and, in the
event such service is not available, at the mean between the most recent bid and
ask prices as obtained from one or more dealers that make markets in the
securities. Short-term investments with maturities of 60 days or less at the
time of purchase ordinarily are valued on the basis of the amortized cost. This
involves valuing an instrument at its cost initially and, thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument. If
the Advisor determines that amortized cost does not reflect fair value of a
security, the Board may select an alternative method of valuing the security.
DIVIDENDS AND TAXES
The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
complying with the applicable provisions of the Code, the Fund will not be
subject to Federal income tax on its net investment income and capital gain net
income that are distributed to shareholders.
All income dividends and capital gains distributions are normally
reinvested, without charge, in additional full and fractional shares of the
Fund. Alternatively, investors may choose: (1) automatic reinvestment of capital
gains distributions in Fund shares and payment of income dividends in cash; (2)
payment of capital gains distributions in Fund shares and automatic reinvestment
of dividends in Fund shares; or (3) all income dividend and capital gains
distributions paid in cash. The share price of the reinvestment will be the net
asset value of the Fund shares computed at the close of business on the date the
dividend or distribution is paid. Dividend checks returned to the Fund as being
undeliverable and dividend checks not cashed after 180 days will automatically
be reinvested at the price of the Fund on the day returned or on the 181st day,
and the distribution option will be changed to "reinvest."
At the time of purchase, the share price of the Fund may reflect
undistributed net investment income, capital gains or unrealized appreciation of
securities. Any dividend or capital gains distribution paid to a shareholder
shortly after a purchase of shares will reduce the per share net asset value by
the amount of the distribution. Although in effect a return of capital to the
shareholder, these capital gains distributions are fully taxable.
The Fund is subject to a non-deductible 4% excise tax calculated as a
percentage of certain undistributed amounts of taxable ordinary income and
capital gains net of capital losses. The Fund intends to make such distributions
as may be necessary to avoid this excise tax.
Dividends consisting of substantially all of the net income are declared
and paid monthly. Investors may request automatic redemption of dividend income
at each month or quarter end.
Dividends from taxable net investment income and distributions of net
short-term capital gains paid by the Fund are taxable to shareholders as
ordinary income, whether received in cash or reinvested in additional shares of
the Fund. None of the dividends paid by the Fund are expected to qualify for the
70% dividends received deduction available to corporations. Distributions of net
capital gains will be taxable to shareholders as long-term capital gains,
whether paid in cash or reinvested in additional shares, regardless of the
length of time the investor has held his shares.
Under Federal law, the income derived from obligations issued by the United
States Government and certain of its agencies and instrumentalities is exempt
from state income taxes. All states that tax personal income permit mutual funds
to pass through this tax exemption to shareholders provided applicable
diversification/threshold limits and reporting requirements are satisfied.
Each January, the Fund will report to its shareholders as to the Federal
tax status of dividends and distributions paid or declared by the Fund during
the preceding calendar year.
The foregoing discussion relates only to generally applicable Federal
income tax provisions in effect as of the date of this Prospectus. Shareholders
should consult their tax advisers about the status of distributions from the
Fund in their own states and localities. To assist in this regard, each January
the Fund will provide shareholders with a breakdown of Fund assets and income
for the year.
THE TRUST
The Pauze' Funds (the "Trust") is an open-end management investment company
which may consist of numerous separate, diversified portfolios each of which has
its own investment objectives and policies.
The Trust was formed October 15, 1993, as a "business trust" under the laws
of the Commonwealth of Massachusetts. It is a "series" company which is
authorized to issue series of shares without par value, each series representing
interests in a separate portfolio, or to divide the shares of any series into
classes. Shares of three series have been authorized. The Board of Trustees of
the Trust has the power to create additional series, or divide existing series
into two or more classes, at any time, without a vote of shareholders of the
Trust.
Under the Trust's Master Trust Agreement, no annual or regular meeting of
shareholders is required; however, the Trustees may call meetings to take action
on matters which require shareholder vote and other matters which Trustees
determine shareholder vote is necessary or desirable.
Shareholders elect the Trustees of the Trust. Subject to Section 16(a) of
the 1940 Act, the Trustees may elect their own successors and may appoint
Trustees to fill vacancies, including vacancies caused by an increase in the
number of Trustees by action of the Board of Trustees.
Whether appointed or elected, a Trustee serves as Trustee of the Trust for
a period of six years. Notwithstanding the foregoing, the Trustees' terms are
staggered so that the terms of at least 25% of the Board of Trustees will expire
every three years. A Trustee whose term is expiring may be re-elected.
On any matter submitted to shareholders, shares of the portfolio entitle
their holder to one vote per share, irrespective of the relative net asset
values of each portfolio's shares. On matters affecting an individual portfolio,
a separate vote of shareholders of the portfolio is required. The portfolio's
shares are fully paid and non-assessable by the Trust, have no preemptive or
subscription rights, and are fully transferable, with no conversion rights.
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders or
prospective shareholders, the Fund may compare its performance, either in terms
of its yield, total return or its yield and total return, to that of other
mutual funds with similar investment objectives and to stock or other indices.
For example, the Fund may compare its performance to rankings prepared by Lipper
Analytical Services, Inc. ("Lipper"), a widely recognized independent service
which monitors the performance of mutual funds, to Morningstar's Mutual Fund
Values, to Moody's Bond Survey Bond Index, or to the Consumer Price Index.
Performance information and rankings as reported in Changing Times, Business
Week, Institutional Investor, the Wall Street Journal, Mutual Fund Forecaster,
No-Load Investor, Money Magazine, Forbes, Fortune and Barrons magazine may also
be used in comparing performance of the Fund. Performance comparisons shall not
be considered as representative of the future performance of the Fund.
The Fund's average annual total return is computed by determining the
average annual compounded rate of return for a specified period that, if applied
to a hypothetical $1,000 initial investment, would produce the redeemable value
of that investment at the end of the period, assuming reinvestment of all
dividends and distributions and with recognition of all recurring charges. The
Fund may also utilize a total return for differing periods computed in the same
manner but without annualizing the total return.
The Fund's "yield" refers to the income generated by an investment in the
Fund over a 30-day (or one month) period (which period will be stated in the
advertisement). Yield is computed by dividing the net investment income per
share earned during the most recent calendar month by the maximum offering price
per share on the last day of such month. This income is then "annualized." That
is, the amount of income generated by the investment during that 30-day period
is assumed to be generated each month over a 12-month period and is shown as a
percentage of the investment.
For purposes of the yield calculation, interest income is computed based on
the yield to maturity of each debt obligation and dividend income is computed
based upon the stated dividend rate of each security in the Fund's portfolio and
all recurring charges are recognized.
The standard total return and yield results do not take into account
recurring and nonrecurring charges for optional services which only certain
shareholders elect and which involve nominal fees such as a fee for exchanges.
These fees have the effect of reducing the actual return realized by
shareholders.
PAUZE' FUND
SHARES OF THE FUND ARE SOLD
AT NET ASSET VALUE WITHOUT SALES COMMISSIONS
OR REDEMPTION FEES
Pauze' U.S. Government Total Return Bond Fun
INVESTMENT ADVISOR
Pauze' Swanson Capital Management Co
14340 Torrey Chase Boulevard, Suite 170
Houston, Texas 77014
ADMINISTRATOR
Declaration Services Company
P.O. Box 844
Conshohocken, PA 19428-0844
TRANSFER AGENT
Declaration Services Company
P.O. Box 844
Conshohocken, PA 19428-0844
CUSTODIAN
Bankers Trust Company
16 Wall Street
New York, NY 10005
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
One Riverwalk Place, Ste. 900
San Antonio, Texas 78205
No Load Fund
Be Sure to Retain This Prospectus;
It Contains Valuable Information.
<PAGE>
PART B -- STATEMENT OF ADDITIONAL INFORMATION
Included herein is the
Statement of Additional Information for the
Pauze' U.S. Government Total Return Bond Fund
Post-Effective Amendment No. 5
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PAUZE' FUNDS
PAUZE' U. S. GOVERNMENT TOTAL RETURN BOND FUND
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Fund's prospectus dated February 14, 1996, (the
"prospectus") which may be obtained from Declaration Service Company ("DSC" or
the "Administrator"), P.O. Box 844, Conshohocken, Pennsylvania 19428-0844.
The date of this Statement of Additional Information is February 14, 1996.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
----
GENERAL INFORMATION.........................................................3
INVESTMENT OBJECTIVES AND POLICIES..........................................4
Investment Restrictions............................................4
PORTFOLIO TURNOVER..........................................................5
PORTFOLIO TRANSACTIONS......................................................5
MANAGEMENT OF THE FUND......................................................6
PRINCIPAL HOLDERS OF SECURITIES.............................................7
INVESTMENT ADVISORY SERVICES ...............................................7
ADMINISTRATOR SERVICES......................................................8
TRANSFER AGENCY AND OTHER SERVICES..........................................8
12b-1 PLAN OF DISTRIBUTION..................................................9
ADDITIONAL INFORMATION ON REDEMPTIONS.......................................9
Suspension of Redemption Privileges................................9
CALCULATION OF PERFORMANCE DATA............................................10
TAX STATUS.................................................................11
CUSTODIAN..................................................................12
INDEPENDENT ACCOUNTANTS....................................................13
FINANCIAL STATEMENTS.......................................................13
<PAGE>
GENERAL INFORMATION
Pauze' Funds (the "Trust") is an open-end management investment company and
is a voluntary association of the type known as a "business trust" organized
under the laws of the Commonwealth of Massachusetts. The Pauze' U. S. Government
Total Return Bond Fund (hereinafter sometimes referred to as the "Fund") is one
series of the Trust, which represents a diversified portfolio of securities
(referred to herein as the "Portfolio").
The assets received by the Trust from the issue or sale of shares of the
Portfolio, and all income, earnings, profits and proceeds thereof, subject only
to the rights of creditors, are allocated to the Portfolio. They constitute the
underlying assets of the Portfolio, are required to be segregated on the books
of accounts, and are to be charged with the expenses with respect to the
Portfolio. In the event additional portfolios are created, any general expenses
of the Trust, not readily identifiable as belonging to the Portfolio, shall be
allocated by or under the direction of the Board of Trustees (the "Trustees") in
such manner as the Trustees determine to be fair and equitable.
Shares represent a proportionate interest in the Portfolio. Shares of a
Portfolio maybe divided into classes with respect to which the Trustees have
adopted allocation plans regarding expenses specifically attributable to a
particular class of shares. Subject to such an allocation, all shares are
entitled to such dividends and distributions, out of the income belonging to the
Portfolio, as are declared by the Trustees. Upon liquidation of the Trust,
shareholders of the Portfolio are entitled to share pro rata, adjusted for
expenses attributable to a particular class of shares, in the net assets
belonging to the Portfolio available for distribution.
As more fully described under "The Trust" in the prospectus under the
Trust's Master Trust Agreement, no annual or regular meeting of shareholders is
required; however, the Trustees may call meetings to take action on matters
which require shareholder vote and other matters which Trustees determine
shareholder vote is necessary or desirable. Whether appointed by prior Trustees
or elected by shareholders, an "Independent" Trustee serves as Trustee of the
Trust for a period of six years. However, the Trustees' terms are staggered so
that the terms of at least 25% of the Board of Trustees will expire every three
years. Trustees who are not "interested persons" will stand for election in
1996. A Trustee whose term is expiring may be re-elected. Thus, shareholder
meetings will ordinarily be held only once every three years unless otherwise
required by the Investment Company Act of 1940 (the "1940 Act").
On any matter submitted to shareholders, the holder of each share is
entitled to one vote per share (with proportionate voting for fractional
shares).
Shares do not have cumulative voting rights, which means that in situations
in which shareholders elect Trustees, holders of more than 50% of the shares
voting for the election of Trustees can elect 100% of the Trust's Trustees, and
the holders of less than 50% of the shares voting for the election of Trustees
will not be able to elect any person as a Trustee.
Shares have no preemptive or subscription rights and are fully
transferable. There are no conversion rights.
Under Massachusetts law, the shareholders of the Trust could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Master Trust Agreement disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or the Trustees. The Master Trust Agreement provides for indemnification out of
the Trust's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to meet its
obligations.
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the Fund's
investment objectives and policies in the Fund's Prospectus.
INVESTMENT RESTRICTIONS
The Pauze' U. S. Government Total Return Bond Fund will not change any of
the following investment restrictions, without, in either case, the affirmative
vote of a majority of the outstanding voting securities of the Fund, which, as
used herein, means the lesser of (1) 67% of the Fund's outstanding shares
present at a meeting at which more than 50% of the outstanding shares of the
Fund are represented either in person or by proxy, or (2) more than 50% of the
Fund's outstanding shares.
The Fund may not:
(1) Issue senior securities.
(2) Borrow money, except that the Fund may borrow not in excess of 331/3%
of the total assets of the Fund from banks as a temporary measure for
extraordinary purposes.
(3) Underwrite the securities of other issuers.
(4) Purchase or sell real property (including limited partnership
interests, but excluding readily marketable interests in real estate
investment trusts or readily marketable securities or companies which
invest in real estate).
(5) Engage in the purchase or sale of commodities.
(6) Lend its assets, except that purchases of debt securities in
furtherance of the Fund's investment objectives will not constitute
lending of assets and except that the Fund may lend portfolio
securities with an aggregate market value of not more than one-third
of the Fund's total net assets. (Accounts receivable for shares
purchased by telephone shall not be deemed loans.)
(7) Purchase any security on margin, except that it may obtain such
short-term credits as are necessary for clearance of securities
transactions.
(8) Make short sales.
(9) Invest more than 25% of its total assets in securities of companies
principally engaged in any one industry, except that this restriction
does not apply to debt obligations of the United States Government
which are protected by the full faith and credit of the United States
Government.
(10) (a) Invest more than 5% of the value of its total assets in securities
of any one issuer, except such limitation shall not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities, or (b) acquire more than 10% of the
voting securities of any one issuer.
The following investment restrictions may be changed by the Board of Trustees
without a shareholder vote.
The Fund may not:
(11) Invest in warrants to purchase common stock.
(12) Invest in companies for the purpose of exercising control or
management.
(13) Hypothecate, pledge, or mortgage any of its assets, except to secure
loans as a temporary measure for extraordinary purposes and except as
may be required to collateralize letters of credit to secure state
surety bonds.
(14) Participate on a joint or joint and several basis in any trading
account (except for a joint securities trading account with other
Funds managed by the Advisor for repurchase agreements permitted by
the Securities and Exchange Commission pursuant to an exemptive
order).
(15) Invest in any foreign securities.
(16) Invest more than 15% of its total net assets in illiquid securities.
(17) Invest in oil, gas or other mineral leases.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage, resulting from a change in values of
portfolio securities or amount of net assets, will not be considered a violation
of any of the foregoing restrictions.
The following discussion of the investment objectives, policies and risks
associated with the Fund supplements the discussion in the prospectus.
PORTFOLIO TURNOVER
Pauze' Funds' Management buys and sells securities for the Fund to
accomplish its investment objectives. The Fund's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly fluctuating
interest rates. The Fund's investments may also be traded to take advantage of
perceived short-term disparities in market values or yields among securities of
comparable quality and maturity.
A change in the securities held by the Fund is known as "portfolio
turnover." For the period from July 1, 1994 through April 30, 1995, the Fund's
portfolio turnover ratio was 168.90%. High portfolio turnover in any given year
indicates a substantial amount of short-term trading, which will result in
payment by the Fund from capital of above-average amounts of markups to dealers
and could result in the payment by shareholders of above-average amounts of
taxes on realized investment gain. Any short-term gain realized on securities
will be taxed to shareholders as ordinary income. See "Tax Status."
PORTFOLIO TRANSACTIONS
The Advisory Agreement between the Trust and the Advisor requires that the
Advisor, in executing portfolio transactions and selecting brokers or dealers,
seek the best overall terms available. In assessing the terms of a transaction,
consideration may be given to various factors, including the breadth of the
market in the security, the price of the security and the financial condition
and execution capability of the broker or dealer (for a specified transaction
and on a continuing basis). When transactions are executed in the
over-the-counter market, it is intended generally to seek first to deal with the
primary market makers. However, the services of brokers will be utilized if it
is anticipated that the best overall terms can thereby be obtained. Purchases of
newly issued securities for the Fund usually are placed with those dealers from
which it appears that the best price or execution will be obtained. Those
dealers may be acting as either agents or principals.
As all portfolio securities transactions were executed with principals, the
Fund paid no brokerage fees for the period from July 1, 1994 through April 30,
1995.
MANAGEMENT OF THE FUND
The Trustees and Officers of the Trust and their principal occupations
during the past five years are set forth below. Except as otherwise indicated,
the business address of each is Suite 6160, 555 North Lane, Conshohocken,
Pennsylvania 19428.
- ----------------------- -------- -----------------------------------
TRUST
NAME AND ADDRESS POSITION PRINCIPAL OCCUPATION
- ----------------------- -------- -----------------------------------
PHILIP C. PAUZE' ** President President of Pauze', Swanson &
14340 TORREY CHASE BLVD. and Associates Investment Advisors,
SUITE 170 Trustee Inc., d/b/a Pauze' Swanson Capital
HOUSTON, TEXAS 77014 Management Co., an asset management
firm specializing in management of
fixed income portfolios since April
1993. Owner of Philip C. Pauze' &
Associates, a management consulting
firm since April 1993. Vice
President/Registered Representative
with Shearson Lehman Brothers from
1988 to 1993. Financial Consultant
to California Master Trust since
1986.
** This Trustee may be deemed an "interested person" of the Trust as defined
in the Investment Company Act of 1940.
TERENCE P. SMITH ** Secretary President and Chief Operating
and Officer of the companies of the
Trustee Declaration Group (including
Declaration Service Company, which
provides the Trust's transfer
agency accounting and
administrative services and
Declaration Distributors, Inc., a
registered broker-dealer, which
provides distribution service to
the Trust) since 1988. Vice
President-Operations of Declaration
Holdings, Inc. from September 1987
to September 1988. Executive Vice
President of Review Management (an
investment manager and distributor)
from 1984 to 1987. CPA, served on
tax and audit staff of Peat Marwick
Main & Co., Philadelphia, from 1981
to 1984.
** This Trustee may be deemed an "interested person" of the Trust as defined
in the Investment Company Act of 1940.
PAUL HILBERT Trustee Attorney with the firm of Paul J.
3818 SHIPMAN Hilbert & Associates. Legislator,
SPRING, TEXAS 77388 Texas House of Representatives
since 1982: House Ways and Means
Committee, House Appropriations
Committee, House Committee on
Business and Commerce. Affiliate of
First American Title, Title USA and
Stewart Title. Economic development
consultant to Houston Lighting and
Power. Associate of the business
consulting firm of Louie Welch &
Associates. Board of Directors of
the Houston Northwest Chamber of
Commerce.
GORDON ANDERSON Trustee Superintendent of Schools, Spring
1806 ELK RIVER RD. Independent School District,
HOUSTON, TEXAS 77090 Houston, Texas since May 1, 1981.
Board of Directors, Houston
Northwest Chamber of Commerce.
WAYNE F. COLLINS Trustee Retired. From September 1991 to
32 AUTUMN CRESCENT February 1994 was Vice President of
THE WOODLANDS, TX 77381 Worldwide Business Planning of the
Compaq Computer Corporation. Served
Compaq Computer Corporation as Vice
President of Materials Operations
from September 1988 to September
1991; Vice President, Materials and
Resources from April 1985 to
September 1991; Vice President,
Corporate Resources from June 1983
to September 1988.
PAUL L. GIORGIO Chief Chief Financial Officer of the
Accounting companies of the Declaration Group
Officer, (including DSC) since 1994. CPA,
Treasurer served on staff of Sanville &
Company, Abington, PA from 1986 to
1993.
PRINCIPAL HOLDERS OF SECURITIES
Other than indicated below, as of February 9, 1996, the Officers and
Trustees of the Trust, as a group, owned less than 1% of the outstanding shares
of the Fund. The Trust is aware of the following persons who owned of record, or
beneficially, more than 5% of the outstanding shares of the Fund at February 9,
1996:
- ------------- ------------------------------------ ------- ---------
NAME & ADDRESS TYPE OF
FUND OF OWNER % OWNED OWNERSHIP
- ------------- ------------------------------------ ------- ---------
Pauze' U. S. Mechanics Bank of Richmond TTEE 73.46% Record
Government Richmond, CA 94806-1921
Total Return
Bond Fund Donaldson Lufkin Jenrette Sec. Corp. 11.30% Record
Jersey City, NJ 07303-2052
INVESTMENT ADVISORY SERVICES
The investment advisor to the Trust is Pauze', Swanson & Associates
Investment Advisors, Inc., dba Pauze' Swanson Capital Management Co., an
investment management firm (the "Advisor"), pursuant to an Advisory Agreement.
It will compensate all personnel, officers and trustees of the Trust if such
persons are employees of the Advisor or its affiliates. The Trust pays the
expense of printing and mailing prospectuses and sales materials used for
promotional purposes.
The Advisory Agreement was approved by the Board of Trustees of the Trust
(including a majority of the "disinterested Trustees") and by vote of a majority
of the outstanding voting securities of the Fund in December 1995. The terms of
the votes approving the Advisory Agreement provide that it will continue until
October 17, 1996, and from year to year thereafter as long as it is approved at
least annually both (i) by a vote of a majority of the outstanding voting
securities of the Fund (as defined in the Investment Company Act of 1940 [the
"Act"]) or by the Board of Trustees of the Trust, and (ii) by a vote of a
majority of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Advisory Agreement may be
terminated on 60 days' written notice by either party and will terminate
automatically if it is assigned.
The securities laws of certain states in which shares of the Trust may,
from time to time, be qualified for sale require that the Advisor reimburse the
Trust for any excess of a Fund's expenses over prescribed percentages of the
Fund's average net assets. Thus, the Advisor's compensation under the Agreements
are subject to reduction in any fiscal year to the extent that total expenses of
the Fund for such year (including the Advisor's compensation but exclusive of
taxes, brokerage commission, extraordinary expenses, and other permissible
expenses) exceed the most restrictive applicable expense limitation prescribed
by any state in which the Trust's shares are qualified for sale. The Advisor may
obtain waivers of these state expense limitations from time to time. Such
limitation is currently 2.5% of the first $30 million of average net assets, 2%
of the next $70 million of average net assets and 1.5% of the remaining average
net assets. For the periods from January 10, 1994 (initial public offering)
through June 30, 1994, and from July 1, 1994 through April 30, 1995, the Trust
paid the Advisor advisory fees of $0.00 and $37,029, respectively, net of
expenses paid by the Advisor or fee waivers.
For a more complete description, see "Management" in the prospectus.
ADMINISTRATOR SERVICES
Declaration Service Company ("DSC" or "Administrator") provides day-to-day
administrative services to the Trust. As described in the Fund's Prospectus, the
Administrator will provide the Trust with office space, facilities and simple
business equipment, and will generally manage the Fund's business affairs and
provide the services of executive and clerical personnel for administering the
affairs of the Trust. It will compensate all personnel, officers and Trustees of
the Trust if such persons are employees of the Administrator or its affiliates.
The Trust pays the expense of printing and mailing prospectuses and sales
materials used for promotional purposes.
The Board of Trustees of the Trust (including a majority of the
"disinterested Trustees") approved the Administration Agreement, dated February
13, 1996 with DSC. The terms of the Administration Agreement provide that it
will continue initially for two years, and from year to year thereafter as long
as it is approved at least annually (i) by a vote of a majority of the Board of
Trustees of the Trust, and (ii) by a vote of a majority of the Trustees who are
not parties to the Administration Agreement or "interested persons" of any party
thereto, cast in person at a meeting called for the purpose of voting on such
approval. The Administration Agreement may be terminated on 90 days' written
notice by either party prior to commencement of a renewal date and will
terminate automatically if it is assigned.
Prior to February 13, 1996, administrative services were provided by United
Services Advisors Inc. ("USAI"). For the periods from January 10, 1994 (initial
public offering) through June 30, 1994, and from July 1, 1994 through April 30,
1995, the Trust paid USAI administrative fees of $0.00 and $15,400,
respectively, net of expenses paid by USAI or fee waivers.
For a more complete description, see "Management" in the prospectus.
The Trust shall pay all other expenses for its operations and activities.
As additional Portfolios are added in the future, each Portfolio of the Trust
will pay its allocable portion of the expenses. The expenses borne by the Trust
include the charges and expenses of any transfer agents and dividend disbursing
agents, custodian fees, legal and auditors' expenses, bookkeeping and accounting
expenses, brokerage commissions for portfolio transactions, taxes, if any, the
administrative fee, extraordinary expenses, expenses of issuing and redeeming
shares, expenses of shareholder and trustee meetings, expenses for preparing,
printing and mailing proxy statements, reports and other communications to
shareholders, expenses of registering and qualifying shares for sale, fees of
Trustees who are not "interested persons" of the Advisor and Administrator,
expenses of attendance by officers and Trustees at professional meetings of the
Investment Company Institute, the No-Load Mutual Fund Association or similar
organizations, and membership or organization dues of such organizations,
expenses of preparing and setting in type prospectuses and periodic reports and
expenses of mailing them to current shareholders, fidelity bond premiums, cost
of maintaining the books and records of the Trust, and any other charges and
fees not specifically enumerated.
TRANSFER AGENCY AND OTHER SERVICES
In addition to the services performed for the Trust under the
Administration Agreement, the Administrator provides transfer agent and dividend
disbursement agent services pursuant to the Transfer Agency and Shareholder
Services Agreement as described in the Fund's prospectus under "Management of
the Fund -- The Administrator." In addition, bookkeeping and accounting services
are also provided. The Board of Trustees approved the Transfer Agency and
Accounting Services Agreement, effective February 13, 1996, with the same
duration and termination provisions as the Administration Agreement.
Prior to February 13, 1996, the transfer agency and accounting services
were provided by United Shareholder Services Inc. ("USSI"), as subsidiary of
USAI. For the periods from January 10, 1994 (initial public offering) through
June 30, 1994, and from July 1, 1994 through April 30, 1995, the Trust paid USSI
transfer agent fees of $0.00 and $26,349, respectively, and bookkeeping and
accounting fees of $0.00 and $31,250, respectively, net of expenses paid by USSI
or fee waivers.
12B-1 PLAN OF DISTRIBUTION
As described under "12b-1 Fee" in the prospectus, in April 1995 the
Trustees approved continuation of a Distribution Plan pursuant to Rule 12b-1
under the 1940 Act (the "Distribution Plan"). The Distribution Plan allows the
Fund to pay for or reimburse expenditures in connection with sales and
promotional services related to the distribution of Fund shares, including
personal services provided to prospective and existing Fund shareholders, which
includes the cost of: printing and distribution of prospectuses and promotional
materials; making slides and charts for presentations; assisting shareholders
and prospective investors in understanding and dealing with the Fund; and travel
and out-of- pocket expenses (E.G., copy and long distance telephone charges)
related thereto.
The total amount expended pursuant to the Distribution Plan may not exceed
0.25% of the Fund's net assets on an annual basis. No excess distribution
expenses shall be carried over from any one year to be reimbursed in future
years.
Expenses which the Fund incurs pursuant to the Distribution Plan are
reviewed quarterly by the Board of Trustees. On an annual basis the Distribution
Plan is reviewed by the Board of Trustees as a whole, and the Trustees who are
not "interested persons" as that term is defined in the 1940 Act, and who have
no direct or indirect financial interest in the operation of the Distribution
Plan ("Qualified Trustees"). In their review of the Distribution Plan the Board
of Trustees, as a whole, and the Qualified Trustees determine whether, in their
reasonable business judgment and in light of their fiduciary duties under state
law and under Section 36(a) and (b) of the 1940 Act, there is a reasonable
likelihood that the Distribution Plan will benefit the Fund and its
shareholders. The Distribution Plan may be terminated at any time by vote of a
majority of the Qualified Trustees, or by vote of a majority of the outstanding
voting securities of the Fund.
On February 13, 1996, in light of and subject to the Distribution Plan, the
Trust entered into a Distribution Agreement with Declaration Distributors, Inc.
("DDI"), an affiliate of DSC as described in the Fund's prospectus under
"Management of the Fund-- The Administrator". Terence P. Smith, a Trustee of the
Trust, is the President and Chief Executive Officer of DDI.
Except for Mr. Smith, the Fund is unaware of any Trustee or any interested
person of the Fund who has a direct or indirect financial interest in the
operations of the Distribution Plan.
The Fund expects that the Distribution Plan will be used primarily to pay a
"service fee" to persons who provide personal services to prospective and
existing Fund shareholders. Shareholders of the Fund will benefit from these
personal services and the Fund expects to benefit from economies of scale as
more shareholders are attracted to the Fund.
ADDITIONAL INFORMATION ON REDEMPTIONS
Suspension of Redemption Privileges. The Trust may suspend redemption
privileges or postpone the date of payment for up to seven days, but cannot do
so for more than seven days after the redemption order is received except during
any period (1) when the NYSE is closed, other than customary weekend and holiday
closings, or trading on the Exchange is restricted as determined by the
Securities and Exchange Commission ("SEC"), (2) when an emergency exists, as
defined by the SEC, which makes it not reasonably practicable for the Trust to
dispose of securities owned by it or not reasonably practicable to fairly
determine the value of its assets, or (3) as the SEC may otherwise permit.
CALCULATION OF PERFORMANCE DATA
TOTAL RETURN
The Fund may advertise performance in terms of average annual total return
for 1, 5 and 10 year periods, or for such lesser periods as the Fund has been in
existence. Average annual total return is computed by finding the average annual
compounded rates of return over the periods that would equate the initial amount
invested to the ending redeemable value according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning
of the 1, 5 or 10 year periods at the end
of the year or period;
The calculation assumes all charges are deducted from the initial $1,000
payment and assumes all dividends and distributions by the Fund are reinvested
at the price stated in the prospectus on the reinvestment dates during the
period, and includes all recurring fees that are charged to all shareholder
accounts.
The average annual compounded rate of return for the Fund for the period
from May 1, 1994 through April 30, 1995 was 4.76%. The total return for the Fund
for the ten month period from July 1, 1994 through April 30, 1995 was 5.21%.
YIELD
The Fund may also advertise performance in terms of a 30 day yield
quotation. The 30 day yield quotation is computed by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period according to the following formula:
A - B
YIELD = 2 [ ( ----- + 1) (6) - 1]
CD
Where: A = dividends and interest earned during the period
B = expenses accrued for the period (net of
reimbursement)
C = the average daily number of shares
outstanding during the period that were
entitled to receive dividends
D = the maximum offering price per share on the
last day of the period
The Fund's 30-day yield for the 30 days ending April 30, 1995 was 4.77%.
NONSTANDARDIZED TOTAL RETURN
The Fund may provide the above described standard total return results for
a period which ends as of not earlier than the most recent calendar quarter end
and which begins either twelve months before or at the time of commencement of
the Fund's operations. In addition, the Fund may provide nonstandardized total
return results for differing periods, such as for the most recent six months.
Such nonstandardized total return is computed as otherwise described under
"Total Return" except that no annualization is made. TAX STATUS
TAXATION OF THE FUND -- IN GENERAL
As stated in its prospectus, the Fund intends to qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Fund will not be liable for federal
income taxes on its taxable net investment income and capital gain net income
that are distributed to shareholders, provided that the Fund distributes at
least 90% of its net investment income and net short-term capital gain for the
taxable year.
To qualify as a regulated investment company, the Fund must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of stock, securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities or currencies (the "90% test"); (b) derive in each taxable year less
than 30% of its gross income from the sale or other disposition of stock or
securities held less than three months (the "30% test"), and (c) satisfy certain
diversification requirements at the close of each quarter of the Fund's taxable
year.
The Code imposes a non-deductible 4% excise tax on a regulated investment
company that fails to distribute during each calendar year an amount equal to
the sum of (1) at least 98% of its ordinary income for the calendar year, (2) at
least 98% of its net capital gains for the twelve-month period ending on October
31 of the calendar year and (3) any portion (not taxable to the Fund) of the
respective balance from the preceding calendar year. The Fund intends to make
such distributions as are necessary to avoid imposition of this excise tax.
TAXATION OF THE FUND'S INVESTMENTS
For federal income tax purposes, debt securities purchased by the Fund may
be treated as having original issue discount. Original issue discount represents
interest for federal income tax purposes and can generally be defined as the
excess of the stated redemption price at maturity of a debt obligation over the
issue price. Original issue discount is treated for federal income tax purposes
as earned by the Fund, whether or not any income is actually received, and
therefore, is subject to the distribution requirements of the Code. Generally,
the amount of original issue discount is determined on the basis of a constant
yield to maturity which takes into account the compounding of accrued interest.
Under Section 1286 of the Code, an investment in a stripped bond or stripped
coupon will result in original issue discount.
Debt securities may be purchased by the Fund at a discount which exceeds
the original issue price plus previously accrued original issue discount
remaining on the securities, if any, at the time the Fund purchases the
securities. This additional discount represents market discount for income tax
purposes. In the case of any debt security issued after July 18, 1984, having a
fixed maturity date of more than one year from the date of issue and having
market discount, the gain realized on disposition will be treated as interest
income for purposes of the 90% test to the extent it does not exceed the accrued
market discount on the security (unless the Fund elects to include such accrued
market discount in income in the tax year to which it is attributable).
Generally, market discount is accrued on a daily basis. The Fund may be required
to capitalize, rather than deduct currently, part or all of any direct interest
expense incurred to purchase or carry any debt security having market discount
unless the Fund makes the election to include market discount currently. Because
the Fund must take into account the original issue discount for purposes of
satisfying various requirements for qualifying as a regulated investment company
under Subchapter M of the Code, it will be more difficult for the Fund to make
the distributions to maintain such status and to avoid the 4% excise tax
described above. To the extent that the Fund holds zero-coupon or deferred
interest bonds in its portfolio or bonds paying interest in the form of
additional debt obligations, the Fund would recognize income currently even
though the Fund received no cash payment of interest, and would need to raise
cash to satisfy the obligations to distribute such income to shareholders from
sales of portfolio securities.
The Fund may purchase debt securities at a premium (i.e., at a purchase
price in excess of face amount). The premium may be amortized if the Fund so
elects. The amortized premium on taxable securities is allowed as a deduction,
and, for securities issued after September 27, 1985, must be amortized under an
economic accrual method.
All Shareholders will be notified annually regarding the tax status of
distributions received from the Fund.
TAXATION OF THE SHAREHOLDER
Taxable distributions generally are included in a shareholder's gross
income for the taxable year in which they are received. However, dividends
declared in October, November or December and made payable to shareholders of
record in such a month will be deemed to have been received on December 31, if a
Fund pays the dividends during the following January. Since none of the net
investment income of the Fund is expected to arise from dividends on domestic
common or preferred stock, none of the Fund's distributions will qualify for the
70% corporate dividends-received deduction.
Distributions by the Fund will result in a reduction in the fair market
value of the Fund's shares. Should a distribution reduce the fair market value
below a shareholder's cost basis, such distribution nevertheless would be
taxable to the shareholder as ordinary income or long-term capital gain, even
though, from an investment standpoint, it may constitute a partial return of
capital. In particular, investors should be careful to consider the tax
implications of buying shares of the Fund just prior to a distribution. The
price of such shares purchased at that time includes the amount of any
forthcoming distribution. Those investors purchasing the Fund's shares just
prior to a distribution may receive a return of investment upon distribution
which will nevertheless be taxable to them.
A shareholder of the Fund should be aware that a redemption of shares
(including any exchange into another Portfolio) is a taxable event and,
accordingly, a capital gain or loss may be recognized. If a shareholder of a
Fund receives a distribution taxable as long-term capital gain with respect to
shares of the Fund and redeems or exchanges shares before he has held them for
more than six months, any loss on the redemption or exchange (not otherwise
disallowed as attributable to an exempt-interest dividend) will be treated as
long-term capital loss to the extent of the long term capital gain recognized.
OTHER TAX CONSIDERATIONS
Distributions to shareholders may be subject to additional state, local and
non-U.S. taxes, depending on each shareholder's particular tax situation.
Shareholders subject to tax in certain states may be exempt from state income
tax on distributions made by the Fund to the extent such distributions are
derived from interest on direct obligations of the United States Government.
Shareholders are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in shares of the Fund.
CUSTODIAN
Bankers Trust Company of New York, New York acts as custodian for the Fund.
Declaration Service Company acts as custodian and provides certain services with
respect to the retirement accounts made available by the Administrator to
shareholders of the Fund.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, One Riverwalk Place, Suite 900, San Antonio, Texas
78205 are the independent accountants for the Trust.
FINANCIAL STATEMENTS
The Trust was established on October 15, 1993. The financial statements for
the period from July 1, 1994 through April 30, 1995 are hereby incorporated by
reference from the Annual Report to Shareholders of that date which has been
delivered with this Statement of Additional Information [unless previously
provided, in which event the Trust will promptly provide another copy, free of
charge, upon request to: Declaration Service Company, P.O. Box 844,
Conshohocken, Pennsylvania 19428-0844, 1-800-352-7507].
<PAGE>
PART C -- OTHER INFORMATION
Included herein is Part C for
Pauze', U.S. Government Total Return Bond Fund
Post-Effective Amendment No. 5
<PAGE>
PAUZE' FUNDS
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
(1) The audited financial highlights for the period from July 1, 1994
through April 30, 1995, are found in part A.
(2) The audited financial statements for the period from July 1, 1994
through April 30, 1995, are found in part B.
(B) EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
(1) (a)* Declaration of Trust, Amended and Restated Master Trust
Agreement, dated February 9, 1996, filed herewith..
(2) By-laws of Registrant (incorporated by reference to Initial
Registration Statement filed November 10, 1993).
(3) Not Applicable
(4) Specimen certificate to be provided.
(5) Advisory Agreement between Registrant and Pauze', Swanson &
Associates Investment Advisors, Inc., dated November 1, 1993,
(incorporated by reference to Pre-Effective Amendment #1 filed
January 6, 1994).
(6) * Distribution Agreement among Registrant, Declaration
Distributors, Inc. and Pauze', Swanson Capital Management Co.,
dated February 13, 1996, filed herewith.
(7) Not Applicable
(8) Custodian Agreement between Registrant and Bankers Trust Company
of New York, dated January 4, 1994, (incorporated by reference to
Pre-Effective Amendment #1 filed January 6, 1994).
(9) (a)* Transfer Agency and Shareholder Services Agreement between
Registrant and Declaration Service Company, dated February 13,
1996, filed herewith.
(b)* Accounting Services Agreement between Registrant and
Declaration Service Company, dated February 13, 1996, filed
herewith.
(c)* Administration Agreement between Registrant and
Declaration Service Company dated February 13, 1996,
filed herewith.
(10) Opinion and Consent of Charles W. Lutter, Jr., (incorporated by
reference to Initial Registration Statement filed November 10,
1993).
(11) (a)* Consent of Independent Accountants
(b) Powers of Attorney (incorporated by reference to Initial
Registration Statement filed November 10, 1993).
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Copy of 12b-1 Plan, (incorporated by reference to Initial
Registration Statement filed November 10, 1993).
(16) Schedule for computation of performance quotation provided in the
Registration Statement in response to Item 22 (incorporated by
reference to Post-Effective Amendment #1 filed July 10, 1994). *
* Filed Herewith
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Information pertaining to persons controlled by or under common control
with Registrant is incorporated by reference to the Statement of Additional
Information contained in Part B of this Registration Statement at the
section entitled "Principal Holders of Securities."
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The number of record holders, as of February 9, 1996, of each class of
securities of the Registrant.
TITLE OF CLASS NO. OF RECORD HOLDERS
------------------------------ ----------------
Pauze' U.S. Government Total 42
Return Bond Fund
ITEM 27. INDEMNIFICATION
Under Article VI of the Registrant's Master Trust Agreement, each of its
Trustees and officers or person serving in such capacity with another
entity at the request of the Registrant (a "Covered Person") shall be
indemnified (from the assets of the Sub-Trust or Sub-Trusts in question)
against all liabilities, including, but not limited to, amounts paid in
satisfaction of judgments, in compromises or as fines or penalties, and
expenses, including reasonable legal and accounting fees, incurred by the
Covered Person in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal before any court or
administrative or legislative body, in which such Covered Person may be or
may have been involved as a party or otherwise or with which such person
may be or may have been threatened, while in office or thereafter, by
reason of being or having been such a Trustee or officer, director or
trustee, except with respect to any matter as to which it has been
determined that such Covered Person (i) did not act in good faith in the
reasonable belief that such Covered Person's action was in or not opposed
to the best interests of the Trust or (ii) had acted with wilful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office (either and
both of the conduct described in (i) and (ii) being referred to hereafter
as "Disabling Conduct"). A determination that the Covered Person is not
entitled to indemnification may be made by (i) a final decision on the
merits by a court or other body before whom the proceeding was brought that
the person to be indemnified was not liable by reason of Disabling Conduct,
(ii) dismissal of a court action or an administrative proceeding against a
Covered Person for insufficiency of evidence of Disabling Conduct, or (iii)
a reasonable determination, based upon a review of the facts, that the
indemnitee was not liable by reason of Disabling Conduct by (a) a vote of
the majority of a quorum of Trustees who are neither "interested persons"
of the Trust as defined in Section 1(a)(19) of the 1940 Act nor parties to
the proceeding, or (b) as independent legal counsel in a written opinion.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR AND INVESTMENT
ADMINISTRATOR
Information pertaining to business and other connections of Registrant's
investment advisor and investment administrator is incorporated by
reference to the Prospectus and Statement of Additional Information
contained in Parts A and B of this Registration Statement at the sections
entitled "Management of the Fund" in the Prospectus and "Investment
Advisory Services" and "Administrator Services" in the Statement of
Additional Information.
ITEM 29. PRINCIPAL UNDERWRITERS
Effective February 13, 1996, Registrant entered into a Distribution
Agreement with Declaration Distributors, Inc. ("DDI"). Terence P. Smith,
Secretary and a member of Registrant's Board of Trustees, is President of
DDI.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records maintained by the Registrant are kept at the
Administrator's office located at Suite 6160, 555 North Lane, Conshohocken,
Pennsylvania 19428-0844. All accounts and records maintained by Bankers
Trust Company as custodian for Registrant are maintained in New York.
ITEM 31. NOT APPLICABLE
ITEM 32. UNDERTAKINGS
Registrant undertakes to call a meeting of shareholders for purposes of
voting upon the question of removal of one or more Trustees when requested
in writing to do so by the holders of at least 10% of the Trust's
outstanding shares, and in connection with such meeting to comply with the
provisions of Section 16(c) of the Investment Company Act of 1940 relating
to shareholder communications.
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and that it has duly caused this
Amendment to the Registration Statement on Form N-1A to be signed on its behalf
by the undersigned, thereunto duly authorized in the city of San Antonio, State
of Texas, on the 14th day of February, 1996.
PAUZE FUNDS
By: /S/ PHILIP C. PAUZE'
-------------------------------------
Philip C. Pauze', President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
*/S/ GORDON ANDERSON Trustee February 14, 1996
- ----------------------------
Gordon Anderson
*/S/ PAUL HILBERT Trustee February 14, 1996
- ----------------------------
Paul Hilbert
/S/ PHILIP C. PAUZE' Trustee, President February 14, 1996
- ----------------------------
Philip C. Pauze'
/S/ TERENCE P. SMITH Trustee, Secretary February 14, 1996
- ----------------------------
Terence P. Smith
*/S/ WAYNE F. COLLINS Trustee February 14, 1996
- ----------------------------
Wayne F. Collins
/S/ PAUL L. GIORGIO Chief Accounting February 14, 1996
- ---------------------------- Officer,
Paul L. Georgia Treasurer
By:/S/ CHARLES W. LUTTER, JR.
- -----------------------------
*Charles W. Lutter, Jr.,
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF EXHIBIT NUMBERED PAGES
----------- ------------------------------------------ --------------
1 (a) Amended & Restated Master Trust Agreement
6 Distribution Agreement between Registrant,
Declaration Distributors, Inc. and Pauze',
Swanson Capital Management Co.
9 (a) Transfer Agency and Shareholder Services
Agreement between Declaration Services
Company and Registrant
(b) Accounting Services Agreement between
Registrant and Declaration Service Company
(c) Administration Agreement between
Registrant and Declaration Service Company
11(a) Consent of Independent Accountants
PAUZE' FUNDS
FIRST AMENDED AND RESTATED
MASTER TRUST AGREEMENT
February 9, 1996
PAUZE' FUNDS
FIRST AMENDED AND RESTATED
MASTER TRUST AGREEMENT
Page
DECLARATIONS 1
ARTICLE I. NAME AND DEFINITIONS 1
Section 1.1 Name and Principal Office 1
Section 1.2 Definitions 1
(a) "By-Laws" 1
(b) "1940 Act" 2
(c) "Commission" 2
(d) "Series" 2
(e) "Shareholder" 2
(f) ""Shares" 2
(g) "Trust" 2
(h) "Agreement" 2
(i) "Trustees" 2
(j) "class"
ARTICLE II. PURPOSE OF TRUST 2
ARTICLE III. THE TRUSTEES 3
Section 3.1 Appointment, Election, Removal, etc. 3
(a) Trustees 3
(b) Number 3
(c) Election 3
(d) Term 3
(e) Vacancies 3
(f) Resignation 3
(g) Removal 4
(h) Effect of Death, Resignation, etc. 4
(i) No Accounting 4
Section 3.2 Powers of Trustees 4
(a) Investments 5
(b) Disposition of Assets 5
(c) Ownership Powers 5
(d) Subscription 5
(e) Form of Holding 5
(f) Reorganization, etc. 5
(g) Voting Trusts, etc. 5
(h) Compromise 6
(i) Associations, etc. 6
(j) Borrowing and Security 6
(k) Guarantees, etc. 6
(l) Insurance 6
(m) Vote Required, Place and
Type of Meeting. 6
(n) Distribution Plans 6
Section 3.3 Certain Contracts 6
Section 3.4 Trust Expenses 7
Section 3.5 Ownership of Assets of the Trust 7
ARTICLE IV SHARES/SUB-TRUSTS 8
Section 4.1 Description of Shares 8
Section 4.2 Establishment and Designation of
Sub-Trust and Classes 9
Section 4.3 Rights and Preferences of Sub-Trusts 9
(a) Assets Belonging to Sub-Trusts 9
(b) Liabilities Belonging to Sub-Trusts 9
(c) Determination of Treatment as
Income and/or Capital 10
(d) Dividends 10
(e) Liquidation 10
(f) Voting 11
(g) Redemption by Shareholder 11
(h) Redemption by Trust 11
(i) Net Asset Value 11
(j) Transfer 12
(k) Equality 12
(l) Fractions 12
(m) Conversion Rights 12
(n) Class Differences 12
Section 4.4 Ownership of Shares 12
Section 4.5 Investments in the Trust 13
Section 4.6 No Preemptive Rights 13
Section 4.7 Status of Shares and Limitation of
Personal Liability 13
ARTICLE V SHAREHOLDERS' VOTING POWERS AND MEETINGS 13
Section 5.1 Voting Powers 13
Section 5.2 Meetings and Notice 13
Section 5.3 Record Dates 15
Section 5.4 Quorum and Required Vote 15
Section 5.5 Action by Written Consent 15
Section 5.6 Inspection of Records 15
Section 5.7 Additional Provisions 15
Section 5.8 Shareholder Communications 15
ARTICLE VI LIMITATION OF LIABILITY; INDEMNIFICATION 16
Section 6.1 Trustees, Shareholders, etc. Not Personally
Liable, Notice 16
Section 6.2 Notice for Contracts 16
Section 6.3 Trustee's Good Faith Action; Expert Advice;
No Bond 17
Section 6.4 Indemnification of Shareholders 17
Section 6.5 Indemnification of Trustees, Officers, etc.17
Section 6.6 Compromise Payment 18
Section 6.7 Indemnification Not Exclusive, etc. 18
Section 6.8 Liability of Third Persons Dealing with
Trustees 18
ARTICLE VII MISCELLANEOUS 19
Section 7.1 Duration and Termination of Trust 19
Section 7.2 Reorganization 19
Section 7.3 Amendments 20
Section 7.4 Filing of Copies; References; Headings 20
Section 7.5 Applicable Law 21
Section 7.6 Resident Agent 21
<PAGE>
PAUZE' FUNDS
FIRST AMENDED AND RESTATED
MASTER TRUST AGREEMENT
This AGREEMENT AND DECLARATION OF TRUST (the "Agreement") made at San
Antonio, Texas, the 12th day of October, 1993, by the Trustees named under this
Agreement, and by the holders of shares of beneficial interest to be issued as
provided under this Agreement is hereby amended and restated in its entirety
this 9th day of February, 1996 in the City of San Antonio in the State of Texas,
as follows:.
DECLARATIONS
WHEREAS this Trust has been created to conduct the business of an
investment company; and
WHEREAS this Trust is authorized to issue, in accordance with the
provisions of this Agreement, its shares of beneficial interest in separate
series, with each separate series to be a Sub-Trust described in this Agreement;
WHEREAS the Trustees have agreed to manage the property received by them as
trustees of a Massachusetts business trust in accordance with the provisions in
this Agreement.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets which they may acquire (from time to time) as
Trustees under this Agreement IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust or Sub-Trusts created under
this Agreement as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 Name and Principal Office. This Trust shall be known as Pauze'
Funds and the Trustees will conduct the business of the Trust under that name or
any other name or names as they may from time to time determine. The principal
place of business of the Trust shall be 14340 Torrey Chase Blvd., Suite 170,
Houston, Texas 77014 or at such other location as the Trustees may from time to
time determine.
Section 1.2 Definitions. Unless otherwise specifically stated, the
following terms shall mean:
(a) "By-Laws" shall mean the By-Laws of the Trust as amended from time to
time.
(b) The "1940 Act" refers to the Investment Company Act of 1940 and
regulations thereunder, all as amended from time to time;
(c) The term "Commission" shall have the meaning given it in
the 1940 Act;
(d) "Series" refers to Series of Shares established and designated under or
in accordance with the provisions of Article IV, each of which Series shall be a
Sub-Trust of the Trust;
(e) "Shareholder" means a record owner of Shares;
(f) "Shares" refers to the transferable units of interest into which the
beneficial interest in the Trust and each Sub-Trust of the Trust (as the context
may require) shall be divided from time to time;
(g) The "Trust" refers to the Pauze Funds business trust established by
this Agreement, as amended from time to time, inclusive of each and every
Sub-Trust established hereunder;
(h) "Agreement" shall mean this Agreement and Declaration of Trust as
amended or restated from time to time; and
(i) "Trustees" refers to the Trustees of the Trust named herein or elected
in accordance with Article III; and
(j) "class" refers to any class of Shares of any Series or Sub-Trust
established and designated under or in accordance with the provisions of Article
IV.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to conduct the business of an investment
company, offering Shareholders of the Trust one or more investment programs; and
to engage in any business allowable under applicable law which the Trustees may
deem convenient or proper in furtherance of the Trust's business.
ARTICLE III
THE TRUSTEES
Section 3.1 Appointment, Election, Removal, etc.
(a) Trustees. The Trustees hereof are Philip C. Pauze', 14340 Torrey Chase
Blvd., Suite 170, Houston, Texas 77014; Scott B. Swanson, 14340 Torrey Chase
Blvd., Suite 170, Houston, Texas 77014; Bobby D. Duncan, 7900 Callaghan Rd., San
Antonio, Texas 78229; Paul J. Hilbert, 3818 Shipman, Spring, Texas 77388; Gordon
M. Anderson, 1806 Elk River Road, Houston, Texas 77090; Wayne F. Collins, 32
Autumn Crest, The Woodlands, Texas 77381; David P. Manuel, 13810 Bluff Top
Drive, San Antonio, Texas 78216; Clark R. Mandigo, 317 Geneseo, San Antonio,
Texas 78209; and, Frank E. Holmes, 7900 Callaghan Rd., San Antonio, Texas 78229.
(b) Number. The Trustee(s) serving as such, whether named above or
hereafter appointed or elected, have the discretion to increase or decrease the
number of Trustees. No decrease in the number of Trustees may remove any Trustee
from office prior to the expiration of his term; however, a decrease in the
number of Trustees may coincide with the removal of a Trustee pursuant to
subsection (g) of this Section 3.1.
(c) Election. The Shareholders shall elect the Trustees of the Trust.
Subject to Section 16(a) of the 1940 Act, the Trustees may elect their own
successors and may, pursuant to Section 3.1(e), appoint Trustees to fill
vacancies.
(d) Term. Whether named above, appointed or elected pursuant to the terms
of this Agreement, a Trustee shall serve as trustee of the Trust and each
Sub-Trust hereunder for a period of six years or until termination of the Trust
or the Trustees' death, resignation or removal, whichever occurs first.
Notwithstanding the foregoing, the Trustees' terms shall be staggered so that
the terms of at least 25% of the Board of Trustees will expire every three
years. This provision shall not be construed to preclude re-election of a
Trustee whose terms is expiring.
(e) Vacancies. Any vacancy resulting from death, resignation, removal or
any other means, including without limitation an increase in the number of
trustees by the other trustees, or any anticipated vacancy may (but need not
unless required by the 1940 Act) be filled by a majority of the remaining
Trustees. Subject to the provisions of Section 16(a) of the 1940 Act, the
remaining Trustees, in their sole discretion, may appoint in writing a Trustee
to fill a vacancy, and this appointment shall become effective upon the written
acceptance of such named person and his agreement to be bound by the provisions
of this Agreement. In the event of an appointment to fill an anticipated
vacancy, the appointment shall become effective at or after the date the
anticipated vacancy occurs. No further act is necessary for the Trust estate to
vest in the new Trustee once the appointment is effective.
(f) Resignation. A Trustee may resign as a trustee by delivering to the
Trustees or any Trust officer a signed written document to that effect. The
effective date of such resignation will be the later of date stated in the
document or, the date of delivery of the document to the Trust at its principal
offices.
(g) Removal. Any Trustee may be removed with or without cause at any time
either: (i) by a written document stating the effective date of the removal and
signed by at least two-thirds of the number of Trustees prior to such removal;
or (ii) by at least a two-thirds vote of the outstanding shares, with such vote
cast in person or by proxy at a meeting called for such purpose; or (iii) by a
written declaration signed by Shareholders owning at least two-thirds of the
outstanding shares and filed with the Trust's custodian.
(h) Effect of Death, Resignation, etc. The death, resignation, retirement,
removal, or incapacity of one or more of the Trustees shall not terminate the
Trust or any Sub-Trust or revoke or terminate any existing agency or contract
created or entered into pursuant to the terms of this Agreement.
(i) No Accounting. No persons or estate of such person who has ceased
acting as Trustee shall be required to make an accounting to the Trustees or
Shareholders unless required by the 1940 Act or justified by circumstances
calling for removal for cause.
Section 3.2 Powers. The Trustees may, in accordance with this Trust
Agreement, carry on the business of the Trust and shall have all the powers
necessary to conduct such business to carry out the purpose of the Trust. The
Trustees' powers include, but are not limited to:
adopting By-Laws consistent with the Trust Agreement which specify
procedures for conducting the daily business affairs of the Trust,
including the power to amend and repeal the By-Laws to the extent that the
By-Laws do not reserve that right to the Shareholders;
establish Sub-Trusts, each such Sub-Trust to operate as a separate and
distinct investment medium and with separately defined investment
objectives and policies;
may from time to time in accordance with the provisions of Section 4.1
hereof establish classes of Shares of any Series or Sub-Trust or divide the
Shares of any Series or Sub-Trust into classes;
elect and remove officers and appoint and terminate agents and consultants
and hire and terminate employees, any one or more of the foregoing of whom
may be a Trustee, and may provide for the compensation of all of the
foregoing;
appoint from their own number, and terminate, any one or more committees
consisting of two or more Trustees, including without implied limitation an
executive committee, which may, when the Trustees are not in session and
subject to the 1940 Act, exercise some or all of the power and authority of
the Trustees as the Trustees may determine;
employ one or more Advisers, Administrators, Depositories and Custodians
and may authorize any Depository or Custodian to employ subcustodians or
agents and to deposit all or any part of such assets in a system or systems
for the central handling of securities and debt instruments, retain
transfer, dividend, accounting or Shareholder servicing agents or any of
the foregoing, provide for the distribution of Shares by the Trust through
one or more distributors, principal underwriters or otherwise; and
in general, they may delegate to any officer of the Trust, to any committee
of the Trustees and to any employee, adviser, administrator, distributor,
depository, custodian, transfer and dividend disbursing agent, or any other
agent or consultant of the Trust such authority, powers, functions and
duties as they consider desirable or appropriate for the conduct of the
business and affairs of the Trust, including authority to act in the name
of the Trust and of the Trustees, to sign documents and to act as
attorney-in-fact for the Trustees.
Without limiting the foregoing, the Trustees, on behalf of the Trust,
shall, in accordance with the 1940 Act or other applicable law, have the
authority:
(a) Investments. To invest cash and other property, and to hold cash or
other property uninvested without regard to the custom of investments by
trustees;
(b) Disposition of Assets. To sell, exchange, lend, pledge, mortgage, write
options on and lease any or all of the assets of the Trust;
(c) Ownership Powers. To vote, or give assent, or exercise any rights of
ownership, with respect to stock or other securities, debt instruments or
property; and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper;
(d) Subscription. To exercise powers and rights of subscription which arise
out of ownership of securities or debt instruments;
(e) Form of Holding. To hold any assets of the Trust in the name of the
Trust, Trustees, Sub-Trust, nominee or otherwise;
(f) Reorganization, etc. To consent to or participate in any plan for the
reorganization or consolidation of any corporation or issuer for which a
security or debt instrument is or was held in the Trust;
(g) Voting Trusts, etc. To join with other holders of any securities or
debt instruments in acting through a committee, depository, voting trustee or
otherwise, and in that connection to deposit any security or debt instrument
with, or transfer any security or debt instrument to the other holders or a
representative thereof and to delegate to them such power and authority with
regard to any security or debt instrument (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to pay such portion of the
expenses and compensation of such representative as the Trustees shall deem
proper;
(h) Compromise. To compromise or arbitrate claims (or any matter in
controversy) in favor of or against the Trust or any Sub-Trust;
(i) Associations, etc. To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(j) Borrowing and Security. To borrow funds and to mortgage the assets of
the Trust to secure the obligations arising out of such borrowing;
(k) Guarantees, etc. To make contracts of guaranty, endorse or guarantee
the payment of any obligations of any person; and to mortgage and pledge any
Trust property to secure any of or all such obligations;
(l) Insurance. To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
Trust's business including, without limitation, liability insurance for the
benefit of the Shareholders, Trustees, officers, employees, agents, consultants,
investment advisors, managers, administrators, distributors, principal
underwriters or independent contractors (or any person connected therewith); and
(m) Vote Required, Place and Type of Meeting. Except as otherwise provided
by the 1940 Act or other applicable law, this Agreement or the By-Laws, any
action to be taken by the Trustees on behalf of the Trust or any Sub-Trust may
be taken by a majority of the Trustees present at a meeting of Trustees (a
quorum, consisting of at least a majority of the Trustees then in office, being
present), within or without Massachusetts, including any meeting held by means
of a conference telephone or other communications equipment by means of which
all persons participating in the meeting can hear each other at the same time
and participation by such means shall constitute presence in person at a
meeting, or by written consents of a majority of the Trustees then in office (or
such larger or different number as may be required by the 1940 Act or other
applicable law); and
(n) Distribution Plans. To adopt on behalf of the Trust or any Sub-Trust
with respect to any class thereof a plan of distribution and related agreements
thereto pursuant to the terms of Rule 12b-1 and/or other provisions of the 1940
Act and to make payments from the assets of the Trust or the relevant Sub-Trust
or Sub-Trusts pursuant to said Rule 12b-1 Plan.
Section 3.3 Certain Contracts. The Trustees may from time to time enter
into contracts with any type of organization or individual ("Contracting Party")
to provide services for the Trust. Any delegation of powers by the Trustees
shall not limit the generality of their powers and authority.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
Contracting Party, or of or for any parent or affiliate of any
contracting party or that the contracting party or any parent or
affiliate thereof is a Shareholder or has an interest in the Trust or
any Sub-Trust, or that
(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations,
trusts, associations, partnerships, limited partnerships or other
organizations, or have other business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust or any
Sub-Trust and/or the Trustees or disqualify any Shareholder, Trustee or officer
of the Trust from voting upon or executing the same or create any liability or
accountability to the Trust, any Sub-Trust or its Shareholders, provided that in
the case of any relationship or interest referred to in the preceding clause (i)
on the part of any Trustee or officer of the Trust either (x) the material facts
as to such relationship or interest have been disclosed to or are known by the
Trustees not having any such relationship or interest and the contract involved
is approved in good faith by a majority of such Trustees not having any such
relationship or interest (even though such unrelated or disinterested Trustees
are less than a quorum of all of the Trustees), (y) the material facts as to
such relationship or interest and as to the contract have been disclosed to or
are known by the Shareholders entitled to vote thereon and the contract involved
is specifically approved in good faith by vote of the shareholders, or (z) the
specific contract involved is fair to the Trust as of the time it is authorized,
approved or ratified by the Trustees or by the Shareholders.
Section 3.4 Trust Expenses. The Trustees are authorized to incur on behalf
of the Trust expenses which they deem necessary and proper to carry out the
business of the Trust. As an element of expenses, the Trustees are authorized to
determine, establish, and receive reasonable compensation for their services as
Trustees. The Trustees are authorized to pay all expenses from either principal
or income and may allocate expenses among the Sub-Trusts and/or one or more
classes of Shares thereof as the Trustees, in their discretion, deem necessary
and appropriate.
Section 3.5 Ownership of Assets of the Trust. Title to all of the Trust
assets shall at all times be considered as vested in the Trustees.
ARTICLE IV
SHARES/SUB-TRUSTS
Section 4.1 Description of Shares. The beneficial interest in the Trust
shall consist of one class of no-par Shares; however, the Trustees have
authority to divide the class of Shares into Series of Shares each of which
Series of Shares shall be a separate and distinct Sub-Trust of the Trust, as
they deem necessary or desirable. Each Sub-Trust of Shares established will be
deemed to be a separate Trust under Massachusetts General Laws Chapter 182. The
Trustees shall have exclusive powers without Shareholder approval to establish
any Sub-Trust and to determine the relative rights and preferences between the
Shares of the separate Sub-Trusts as to right of redemption and the price, terms
and manner of redemption, special and relative rights as to dividends and other
distributions and on liquidation, sinking or purchase fund provisions,
conversion rights, and conditions under which the several Sub-Trusts shall have
separate voting rights or no voting rights.
In addition, the Trustees shall have exclusive power, without the
requirement of Shareholder approval, to issue classes of Shares of any Sub-Trust
or divide the Shares of any Sub-Trust into classes, each class having such
difference dividend, liquidation, voting and other rights as the Trustees may
determine, and may establish and designate the specific classes of Shares of
each Sub-Trust. The fact that a Sub-Trust shall have initially been established
and designated without any specific establishment or designation or classes
(i.e., that all Shares of such Sub-Trust are initially of a single class), or
that a Sub-Trust shall have more than one established and designated class,
shall not limit the authority of the Trustees to establish and designate
separate classes, or one or more further classes, of said Sub-Trust without
approval of the holders of the initial class thereof, or previously established
and designated class or classes thereof, provided that the establishment and
designation of such further separate classes would not adversely affect the
rights of the holders of the initial or previously established and designated
class or classes.
The number of authorized Shares and the number of Shares of each Sub-Trust
or class thereof that may be issued is unlimited, and the Trustees may issue
Shares of any Sub-Trust or class thereof for such consideration and on such
terms as they may determine (or for no consideration if pursuant to a Share
dividend or split-up), all without action or approval of the Shareholders. All
Shares when so issued on the terms determined by the Trustees shall be fully
paid and non-assessable (but may be subject to mandatory contribution back to
the Trust as provided in subsection (h) of Section 4.4). The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Sub-Trust or class thereof into one or more Sub-Trusts or
classes thereof that may be established and designated from time to time. The
Trustees may hold as treasury Shares, reissue for such consideration and on such
terms as they may determine, or cancel, at their discretion from time to time,
any Shares of any Sub-Trust or class thereof reacquired by the Trust.
The Trustees may, at any time, abolish a Sub-Trust if no Shares of that
Sub-Trust are outstanding.
The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Shares
entitled to be treated as such, to the extent provided or referred to or Section
5.3.
The establishment and designation of any Sub-Trust or of any class of
Shares of any Sub-Trust in addition to those established and designated in
Section 4.2 shall be effective upon the vote of a majority of the then Trustees
setting forth such establishment and designation and the relative rights and
preferences of the Shares of such Sub-Trust or class, or as otherwise provided
in such instrument. At any time that there are no Shares outstanding of any
particular Sub-Trust or class previously established and designated the Trustees
may by vote of a majority of their number (or by an instrument executed by an
officer of the Trust pursuant to the vote of a majority of the Trustees) abolish
that Sub-Trust or class and the establishment and designation thereof. Each vote
referred to in this paragraph shall be implemented by preparation and filing of
an amendment to this Agreement.
Any Trustee, officer or other agent of the Trust, and any organization in
which any such person is interested may acquire, own, hold and dispose of Shares
of any Sub-Trust (including any classes thereof) of the Trust to the same extent
as if such person were not a Trustee, officer or other agent of the Trust; and
the Trust may issue and sell or cause to be issued and sold and may purchase
Shares of any Sub-Trust (including any classes thereof from any such person or
any such organization subject only to the general limitations, restrictions or
other provisions applicable to the sale or purchase of Shares of such Sub-Trust
(including any classes thereof generally.
Section 4.2 Establishment and Designation of Sub-Trusts. Without limiting
the Trustees' authority to establish further Sub-Trusts pursuant to Section 4.1,
the Trustees hereby establish the following sub-trust: Pauze' U.S. Government
Total Return Bond Fund; Pauze' Short-Term U.S. Government Bond Fund and Pauze'
Intermediate Term U.S. Government Bond Fund.
Section 4.3 Rights and Preferences of Sub-Trusts. Unless otherwise
specified by the Trustees, the Sub-Trusts established above and all future
Sub-Trusts or any classes thereof have the following rights and preferences:
(a) Assets Belonging to Sub-Trusts. All consideration received by the Trust
for the issue or sale of Shares of a particular Sub-Trust or any classes
thereof, all assets in which the consideration is invested, and proceeds from
the sale, exchange or liquidation thereof, all income earnings, profits and
proceeds from those assets and any items allocated to the Sub-Trust or class
thereof by the Trustees shall be held in trust by the Trustees for the benefit
of the Shareholders of that Sub-Trust or class thereof shall irrevocably belong
to that Sub-Trust (and be allocable to any classes thereof) and shall be
recorded on the books of account of the Trust as assets belonging to that
Sub-Trust. The Trustees may, in a manner they deem fair and equitable, allocate
among the Sub-Trusts any items which are not readily identifiable to any one
particular Sub-Trust (and allocable to any classes thereof). Each allocation
shall be binding upon the Shareholders of the Trust.
(b) Liabilities Belonging to Sub-Trusts. The liabilities belonging to a
Sub-Trust shall include all liabilities associated with the assets of that
particular Sub-Trust, all expenses and charges attributable to that Sub-Trust
and any general liabilities which are not readily identifiable and which the
Trustees may allocate in a manner they deem fair and equitable to that
Sub-Trust. In addition, the liabilities in respect of a particular class of
Shares of a particular Sub-Trust and all expenses, costs, charges and reserves
belonging to that class of Shares, and any general liabilities, expenses, costs,
charges or reserves of that particular Sub-Trust which are not readily
identifiable as belonging to any particular class of Shares of that Sub-Trust
shall be allocated and charged by the Trustees to and among any one or more of
the classes of Shares of that Sub-Trust established and designated from time to
time in such manner and on such basis as the Trustees in their sole discretion
deem fair and equitable. Each allocation shall be binding upon the Shareholders
of the Trust. Only the assets of a particular Sub-Trust (including any classes
thereof) may be used to satisfy a creditor of that Sub-Trust.
(c) Determination of Treatment as Income and/or Capital. Except as
otherwise provided by the 1940 Act, the Trustees shall have full discretion to
determine which items shall be treated as income and which items as capital; and
each such determination and allocation shall be conclusive and binding upon the
Shareholders.
(d) Dividends. Dividends and distributions on Shares of a particular
Sub-Trust or any class thereof may be paid with such frequency as the Trustees
may determine, which may be daily or otherwise pursuant to a standing resolution
or resolutions adopted only once or with such frequency as the Trustees may
determine, to the holders of Shares of that Sub-Trust or class, from such of the
income and capital gains, accrued or realized, from the assets belonging to that
Sub-Trust, or in the case of a class, belonging to that sub-trust and allocable
to that class, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that Sub-Trust or class. All dividends and
distributions on Shares of a particular Sub-Trust or class thereof shall be
distributed pro rata to the holders of Shares of that Sub-Trust or class in
proportion to the number of Shares of that Sub-Trust held by such holders at the
date and time of record established for the payment of such dividends or
distributions, except that in connection with any dividend or distribution
program or procedure the Trustees may determine that no dividend or distribution
shall be payable on Shares as to which the Shareholder's purchase order and/or
payment have not been received by the time or times established by the Trustees
under such program or procedure. Such dividends and distributions may be made in
cash or Shares of that Sub-Trust or class or a combination thereof as determined
by the Trustees or pursuant to any program that the Trustees may have in effect
at the time for the election by each Shareholder of the mode of the making of
such dividend or distribution to that Shareholder. Any such dividend or
distribution paid in Shares will be paid at the net asset value thereof as
determined in accordance with the subsection (i) of Section 4.3.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act, to determine which items shall be treated as income and which
items as capital; and each such determination and allocation shall be conclusive
and binding upon the Shareholders.
(e) Liquidation. A Sub-Trust or any class there may be liquidated after
such liquidation has been authorized by a majority vote of the Trustees then in
office and approved by a majority of the outstanding voting Shares of that
Sub-Trust or in the case of a class, belonging to that Sub-Trust and allocable
to that class, over the liabilities belonging to that Sub-Trust or class, as
defined in the 1940 Act. The Shareholders of that particular Sub-Trust or class
thereof shall receive the excess of assets in the Sub-Trust or class thereof
over the liabilities in the Sub-Trust on a pro rata basis.
(f) Voting. On each matter submitted to a vote of the Shareholders, each
holder of a Share of each Sub-Trust or any class thereof shall be entitled to
one vote for each whole Share and for a proportionate fractional vote for each
fractional Share outstanding in his name on the books of the Trust and all
shares of each Sub-Trust or class thereof shall vote as a separate class, except
as to voting for Trustees and as otherwise required by the 1940 Act. As to any
matter which does not affect the interest of a particular Sub-Trust or class
thereof, only the holders of Shares of one or more of the affected Sub-Trusts or
classes thereof shall be entitled to vote.
(g) Redemption by Shareholder. Each Shareholder shall have the right to
tender all or part of his shares of the Sub-Trust or any class thereof for
redemption at such times as the By-Laws permit, but at least once weekly, with
the redemption price equal to the net asset value per Share as defined in this
section. The Trust shall make payment in cash unless in the Trustee's judgment
conditions exist which make payment in cash undesirable, in which case the Trust
may make payment wholly or partly in assets belonging to the Sub-Trust or class
thereof. The Trust may postpone payment of the redemption price and suspend the
Shareholder's right of redemption in appropriate circumstances, to the extent
permissible under the 1940 Act.
(h) Redemption by Trust. The Trustees shall have the right to redeem the
Shares of the Trust and Sub-Trusts or classes thereof at the same redemption
price as if the Shareholder were redeeming the Shares. A redemption by the
Trustees shall occur if: (1) the Trustees determine in their sole discretion
that failure to redeem the Shares would result in material adverse consequences
to the Shareholders of any of the Sub-Trusts; or (2) the failure of a
Shareholder to maintain a minimum amount as set forth in the current prospectus
of the Trust (Sub-Trust). If the Trustees exercise their right of redemption,
the Shareholder shall have no further right except to receive payment of the
redemption price.
(i) Net Asset Value. The net asset value per Share of any Sub-Trust shall
be (a) in the case of a Sub-Trust whose Shares are not divided into classes, the
quotient obtained by dividing the value of the net assets of that Sub-Trust
(being the value of the assets belonging to that Sub-Trust less the liabilities
belonging to that Sub-Trust) by the total number of Shares of that Sub-Trust
outstanding, and (b) in the case of a class of Shares of a Sub-Trust whose
Shares are divided into classes, the quotient obtained by dividing the value of
the assets of that Sub-Trust allocable to such class (less the liabilities
belonging to such class) by the total number of Shares of such class
outstanding. The net asset value shall be computed in accordance with the 1940
Act and regulations thereunder. In calculating the net asset value, methods and
procedures established by the Trustees shall be used.
The Trustees may determine to maintain the net asset value per Share of any
Sub-Trust at a designated constant dollar amount and in connection therewith may
adopt procedures not inconsistent with the 1940 Act for the continuing
declarations of income attributable to that Sub-Trust as dividends payable in
additional Shares of that Sub-Trust at the designated constant dollar amount and
for the handling of any losses attributable to that Sub-Trust. Such procedures
may provide that in the event of any loss each Shareholder shall be deemed to
have contributed to the capital of the Trust attributable to that Sub-Trust his
pro rata portion of the total number of Shares required to be canceled in order
to permit the net asset value per Share of that Sub-Trust to be maintained,
after reflecting such loss, at the designated constant dollar amount. Each
Shareholder of the Trust shall be deemed to have agreed, by his investment in
any Sub-Trust with respect to which the Trustees shall have adopted any such
procedure, to make the contribution referred to in the preceding sentence in the
event of any such loss.
(j) Transfer. All Shares of each particular Sub-Trust or class thereof
shall be transferable, but transfers of Shares of a particular Sub-Trust or
class thereof will be recorded on the Share transfer records of the Trust
applicable to that Sub-Trust or class only at such times as Shareholders shall
have the right to require the Trust to redeem Shares of that Sub-Trust or class
and at such other times as may be permitted by the Trustees.
(k) Equality. Except as provided herein or in the instrument designating
and establishing any class of Shares or any Sub-Trust, all Shares in a
particular Sub-Trust or class thereof shall be equal to each other share in that
Sub-Trust or in the case of a class and and allocable to that class (subject to
the liabilities belonging to that Sub-Trust or class), shall represent an equal
pro rata interest in the Sub-Trust's or classes assets. The Trustees have the
right to divide or combine the Shares of a Sub-Trust or class without affecting
the proportionate beneficial interest in the assets of that Sub-Trust or class.
(l) Fractions. A fractional Share of a Sub-Trust or class proportionately
carries all the rights and obligations of a whole Share of the Sub-Trust or
class.
(m) Conversion Rights. The Trustees shall have authority to establish
procedures pursuant to which a Shareholder of one Sub-Trust or class thereof may
exchange shares of that Sub-Trust for shares of another Sub-Trust or class
thereof.
(n) Class Differences. The relative rights and preferences of the classes
of any Sub-Trust may differ in such other respects as the Trustees may determine
to be appropriate in their sole discretion, provided that such differences are
set forth in the resolutions adopted by the Trustees or the instrument
establishing and designating such classes and executed by a majority of the
Trustees (or by an instrument executed by an officer of the Trust pursuant to a
vote of a majority of the Trustees).
Section 4.4 Ownership of Shares. The ownership of Shares shall be recorded
on the books of the Trust or of a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Sub-Trust and each
class thereof. No certificates certifying the ownership of Shares need be issued
except as the Trustees determine. The Trustees may establish such rules as they
consider appropriate for the issuance of Share certificates, use of facsimile
signatures, transfer of Shares and similar matters. The record books of the
Trust shall be conclusive as to who are the Shareholders and as to the number of
Shares of each Sub-Trust and class thereof held from time to time by each such
Shareholder.
Section 4.5 Investments in the Trust. The Trustees shall have authority to
establish procedures and policies with respect to acceptance or rejection of
investments in the Trust and Sub-Trusts and to authorize other persons to accept
and reject orders for the purchase of Shares in accordance therewith.
Section 4.6 No Preemptive Rights. The Shares of the Trust or Sub-Trusts
have no preemptive rights.
Section 4.7 Status of Shares and Limitation of Personal Liability. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder, by virtue of having become a Shareholder, shall
be held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the Trust or any Sub-Trust thereof nor
entitle the representative of any deceased Shareholder to an accounting or to
take any action in court or elsewhere against the Trust or the Trustees, but
only to the rights of said decedent under this Trust. Ownership of Shares shall
not entitle the Shareholder to any title in or to the whole or any part of the
Trust property or right to call for a partition or division of the same or for
an accounting, nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or agent
of the Trust shall have any power to bind personally any Shareholder, nor,
except as specifically provided herein, to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 5.1 Voting Powers. The Shareholders shall only vote in the
following instances:
(i) election or removal of Trustees as provided herein;
(ii) approval of a contract for which the 1940 Act requires Shareholder
approval;
(iii)termination or reorganization of the Trust or any Sub-Trust if
required by Section 7.2;
(iv) amendment of the Trust Agreement if required by Section 7.3;
(v) determination of whether a derivative or class action suit should be
brought or pursued on behalf of the Trust or Sub-Trust or class
thereof as would the stockholders of a Massachusetts business
corporation, provided that the Shareholders of one Sub-Trust or class
thereof may not vote on an action on behalf of another Sub-Trust or
class thereof or one of its Shareholders; and
(vi) such additional matters relating to the Trust as may be required by
the 1940 Act, this Agreement, the By-Laws or any registration of the
Trust with the Commission (or any successor agency) or any state, or
as the Trustees may consider necessary or desirable.
There shall be no cumulative voting in Trustee elections.
Shares may be voted by proxy or in person. Shares held in the name of two
or more persons may be voted by proxy executed by one of the named persons
unless the Trust is notified to the contrary by written instructions, prior to
the execution of the proxy. A proxy purporting to be executed by or on behalf of
a Shareholder shall be presumed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall be on the challenger.
Until Shares are issued the Trustees may take any action required by law,
this Agreement or the By-Laws to be taken by Shareholders.
Proxies may be given orally or in writing or pursuant to any computerized
or mechanical data gathering process specifically approved by the Trustees.
Section 5.2 Meetings and Notice. No annual or regular meeting of
Shareholders is required; however, the Trustees may call meetings to take action
on matters which require Shareholder vote and for other matters which the
Trustees determine Shareholder vote is necessary or desirable.
The Trustees shall give Shareholders written notice of any Shareholder
meeting by mailing such notice, postage prepaid, at least seven days before the
meeting date to each Shareholder at the Shareholder's address as it appears on
the records of the Trust. The notice shall state the purpose of the meeting.
Upon written request of Shareholders holding 10% or more of the then
outstanding Shares, the Trustees shall call a meeting to vote upon the removal
of a Trustee. If the Trustees do not call a Shareholder meeting within 30 days
after receipt of the written request, Shareholders holding 10% or more the then
outstanding Shares may call a meeting for that purpose giving notice and
following the procedures governing Trustee-called meetings, set forth in this
Agreement.
No notice is required for adjourned sessions which are held within a
reasonable time after the original meeting.
Section 5.3 Record Dates. For the purpose of determining Shareholders
entitled to vote or act at a meeting, to participate in a dividend or
distribution, or for the purpose of any other action, the Trustees may close the
transfer books for a period not exceeding 30 days (except at or in connection
with the termination of the Trust) as the Trustees may determine. Alternatively,
without closing the transfer books, the Trustees may fix a date and time not
more than 60 days prior to the date of any meeting of Shareholders or other
action as the date and time of record for the determination of Shareholders
entitled to vote at such meeting or to be treated as Shareholders of record for
purposes of such other action, and any Shareholder who was a Shareholder at the
date and time so fixed shall be entitled to vote at such meeting or any
adjournment thereof or to be treated as a Shareholder of record for purposes of
such other action, even though he has since that date and time disposed of his
Shares; and, no person becoming a Shareholder after that date and time shall be
so entitled to vote at such meeting or any adjournment thereof or to be treated
as a Shareholder of record for purposes of such other action.
Section 5.4 Quorum and Required Vote. A quorum to conduct business shall
consist of a majority of the Shares entitled to vote at a Shareholder's meeting.
A lesser number is sufficient for adjournments.
Unless otherwise required by applicable law or this Agreement a majority of
the voted Shares at a meeting at which a quorum is present shall be sufficient
to transact business, and Trustees shall be elected by a plurality.
Section 5.5 Action by Written Consent. Unless otherwise required by
applicable law, Shareholders may take action without a meeting if a majority of
the Shareholders entitled to vote on the action (or such greater percentage as
may be required by applicable law for such action) consent in writing to such
action and their consents are filed with the records of the Shareholder
meetings. Written Consents shall be treated as votes taken at a Shareholder
meeting.
Section 5.6 Inspection of Records. Shareholders may inspect the Trust's
records to the same extent permitted by Massachusetts Business Corporation Law
to the stockholders of a Massachusetts business corporation.
Section 5.7 Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
Section 5.8 Shareholder Communications. Whenever ten or more Shareholders
of record have been such for a least six months preceding the date of
application, and who hold in the aggregate either Shares having a net asset
value of at least $25,000 or at least 1% of the outstanding Shares, whichever is
less, shall apply to the Trustees in writing, stating that they wish to
communicate with other Shareholders with a view to obtaining signatures to a
request for a Shareholder meeting and accompanied by a form of communication and
request which they wish to transmit, the Trustees shall within five business
days after receipt of such application either (1) afford to such applicants
access to a list of the names and addresses of all Shareholders as recorded on
the books of the Trust or Sub-Trust, as applicable; or (2) inform such
applicants as to the approximate number of Shareholders of record, and the
approximate cost of mailing to them the proposed communication and form of
request.
If the Trustees elect to follow the course specified in paragraph (2) above
the Trustees, upon the written request of such applicants, accompanied by a
tender of the material to be mailed and of the reasonable expenses of mailing,
shall, with reasonable promptness, mail such material to all Shareholders of
record at their addresses as recorded on the books, unless within five business
days after such tender the Trustees shall mail to such applicants and file with
the Commission, together with a copy of the material to be mailed, a written
statement signed by at least a majority of the Trustees to the effect that in
their opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in such violation of applicable law, and specifying the
basis of such opinion. The Trustees shall thereafter comply with the
requirements of the 1940 Act.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable, Notice. All
persons extending credit to, contracting with or having any claim against the
Trust shall look only to the assets of the Sub-Trust with which such person
dealt for payment under such credit, contract or claim; and neither the
Shareholders of any Sub-Trust nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, nor any other Sub-Trust
shall be personally liable therefor. Every note, bond, contract, instrument,
certificate or undertaking and every other act or thing whatsoever executed or
done by or on behalf of the Trust, any Sub-Trust or the Trustees or any of them
in connection with the Trust shall be conclusively deemed to have been executed
or done only by or for the Trust (or the Sub-Trust) or the Trustees and not
personally. Nothing in this Agreement shall protect any Trustee or officer
against any liability to the Trust or the Shareholders to which such Trustee or
officer would otherwise be subject by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee or of such officer.
Section 6.2 Notice for Contracts. Every contract, instrument, certificate
or undertaking made or issued by the Trustees or by any officers or officer
shall give notice (a) that this Agreement is on file with the Secretary of the
Commonwealth of Massachusetts, (b) that the document was executed or made on
behalf of the Trust or by them as Trustees or as officers and not by them
individually, and (c) that the obligations of such instrument are not binding
upon any of them or the Shareholders individually, but are binding only upon the
assets and property of the Trust, or the particular Sub-Trust in question, as
the case may be. Omission of such notice shall not operate to bind any Trustee,
officer or Shareholder individually.
Section 6.3 Trustee's Good Faith Action; Expert Advice; No Bond. The
exercise by the Trustees of their powers and discretion hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his own wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing else, and
shall not be liable for errors of judgment or mistakes of fact or law. Subject
to the foregoing, (a) the Trustees shall not be responsible or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, consultant,
adviser, administrator, distributor or principal underwriter, custodian or
transfer, dividend disbursing, Shareholder servicing or accounting agent of the
Trust, nor shall any Trustee be responsible for the act or omission of any other
Trustee; (b) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Agreement and their duties as
Trustees, and shall be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice; and (c) in discharging
their duties, the Trustees, when acting in good faith, shall be entitled to rely
upon the books of account of the Trust and upon written reports made to the
Trustees by any officer appointed by them, any independent public accountant,
and (with respect to the subject matter of the contract involved) any officer,
partner or responsible employee of a contracting party appointed by the Trustees
pursuant to Section 3.3. The Trustees, as such, shall not be required to give
any bond or other security for the performance of their duties.
Section 6.4 Indemnification of Shareholders. In case any Shareholder (or
former Shareholder) of any Sub-Trust of the Trust shall be charged or held to be
personally liable for any obligation or liability of the Trust solely by reason
of being or having been a Shareholder and not because of such Shareholder's acts
or omissions or for some other reason, said Sub-Trust (upon proper and timely
request by the Shareholder) shall assume the defense against such charge and
satisfy any judgment thereon, and the Shareholder
or former Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled out of the assets of said
Sub-Trust estate to be held harmless from and indemnified against all loss and
expense arising from such liability.
Section 6.5 Indemnification of Trustees, Officers, etc. The Trust shall
indemnify (from the assets of the Sub-Trust or class thereof or Sub-Trusts or
classes thereof in question) each of its Trustees and officers (including
persons who serve at the Trust's request as directors, officers or trustees of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise [hereinafter referred to as a "Covered Person"]) against
all liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, except with respect to any
matter as to which it has been determined in one of the manners described below,
that such Covered Person (i) did not act in good faith in the reasonable belief
that such Covered Person's action was in or not opposed to the best interests of
the Trust or (ii) had acted with wilful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such Covered
Person's office (either and both of the conduct described in (i) and (ii) being
referred to hereafter as "Disabling Conduct"). A determination that the Covered
Person is not entitled to indemnification due to Disabling Conduct may be made
by (i) a final decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not liable by
reason of Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for insufficiency of evidence
of Disabling Conduct, or (iii) a reasonable determination, based upon a review
of the facts, that the indemnitee was not liable by reason of Disabling Conduct
by (a) a vote of a majority of a quorum of Trustees who are neither "interested
persons" of the Trust as defined in section 2(a)(19) of the 1940 Act nor parties
to the proceeding, or (b) an independent legal counsel in a written opinion.
Expenses, including accountants' and counsel fees so incurred by any such
Covered Person (but excluding amounts paid in satisfaction of judgements, in
compromise or as fines or penalties), may be paid from time to time in advance
of the final disposition of any such action, suit or proceeding, provided that
the Covered Person shall have undertaken to repay the amounts so paid to the
Sub-Trust in question if it is ultimately determined that indemnification of
such expenses is not authorized under this Article VI and (i) the Covered Person
shall have provided security for such undertaking, (ii) the Trust shall be
insured against losses arising by reason of any lawful advances, or (iii) a
majority of a quorum of the disinterested Trustees who are not a party to the
proceeding, or an independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe the Covered Party
ultimately will be found entitled to indemnification.
Section 6.6 Compromise Payment. Any compromise settlement shall be
indemnified only if approved: (a) by a majority of the disinterested Trustees
not a party to the proceeding; or (b) by a written opinion of an independent
legal counsel. If payment has been made pursuant to (a) or (b) and the recipient
is subsequently found to have engaged in bad faith, wilful misfeasance, gross
negligence or reckless disregard of duty, the Trust may recover such payment.
Section 6.7 Indemnification Not Exclusive, etc. The right of
indemnification provided by this Article VI shall not be exclusive of or affect
any other rights to which any covered person may be entitled. The
indemnification shall inure to the benefit of such person's heirs, executors and
administrators. Nothing contained in this article shall affect any rights to
indemnification to which personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability insurance on
behalf of any such person.
Section 6.8 Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Duration and Termination of Trust. This Trust shall continue
for an unlimited period. The Trust may be terminated at any time by a majority
vote of the Trustees then in office and approved by a majority vote of the
outstanding voting shares as defined in 1940 Act, Shares of each Sub-Trust or
each class thereof voting separately by Sub-Trust or class thereof.
No modification of any Sub-Trust or class shall terminate the Trust.
In the event of termination, the Trustees shall pay all due and anticipated
expenses, and then liquidate the assets in a manner the Trustees deem
appropriate and distribute the proceeds according to the provisions of this
Agreement.
Section 7.2 Reorganization. The Trustees may sell, convey, merge and
transfer the assets of the Trust, or the assets belonging to any one or more
Sub-Trusts, to another trust, partnership, association or corporation organized
under the laws of any state of the United States, or to the Trust to be held as
assets belonging to another Sub-Trust of the Trust, in exchange for cash, shares
or other securities (including, in the case of a transfer to another Sub-Trust
of the Trust, Shares of such other Sub-Trust) with such transfer either (1)
being made subject to, or with the assumption by the transferee of, the
liabilities belonging to each Sub-Trust the assets of which are so transferred,
or (2) not being made subject to, or not with the assumption of, such
liabilities; provided, however, that no assets belonging to any particular
Sub-Trust shall be so transferred unless the terms of such transfer shall have
first been approved at a meeting called for the purpose by the affirmation vote
of the holders of a majority of the outstanding voting Shares, as defined in the
1940 Act, of that Sub-Trust. Following such transfer, the Trustees shall
distribute such cash, shares or other securities (giving due effect to the
assets and liabilities belonging to and any other differences among the various
Sub-Trusts and classes the assets belonging to which have been so transferred)
among the Shareholders of the Sub-Trust the assets belonging to which have been
so transferred; and if all of the assets of the Trust have been so transferred,
the Trust shall be terminated.
The Trust, or any one or more Sub-Trusts, may, either as the successor,
survivor, or non-survivor, (1) consolidate with one or more other trusts,
partnerships, associations or corporations organized under the laws of the
Commonwealth of Massachusetts or any other state of the United States, to form a
new consolidated trust, partnership, association or corporation under the laws
of which any one of the constituent entities is organized, or (2) merge into one
or more other trusts, partnerships, associations or corporations organized under
the laws of the Commonwealth of Massachusetts or any other state of the United
States, or have one or more such trusts, partnerships, associations or
corporations merged into it, any such consolidation or merger to be upon such
terms and conditions as are specified in an agreement and plan of reorganization
entered into by the Trust, or one or more Sub-Trusts as the case may be, in
connection therewith. The terms "merge" or "merger" as used herein shall also
include the purchase or acquisition of any assets of any other trust,
partnership, association or corporation which is an investment company organized
under the laws of the Commonwealth of Massachusetts or any other state of the
United States. Any such consolidation or merger shall require the affirmative
vote of the holders of a majority of the outstanding voting Shares, as defined
in the 1940 Act, of each Sub-Trust affected thereby.
Section 7.3 Amendments. All rights granted to the Shareholders under this
Agreement are granted subject to the reservation of the right to amend this
Agreement as herein provided, except that no amendment shall repeal the
limitations on personal liability of any Shareholder or Trustee or repeal the
prohibition of assessment upon the Shareholders without the express consent of
each Shareholder or Trustee involved. Subject to the foregoing, the provisions
of this Agreement (whether or not related to the rights of Shareholders) may be
amended at any time, so long as such amendment does not adversely affect the
rights of any Shareholder with respect to which such amendment is or purports to
be applicable and so long as such amendment is not in contravention of
applicable law, including the 1940 Act, by an instrument in writing signed by a
majority of the then Trustees (or by an officer of the Trust pursuant to the
vote of a majority of such Trustees). Any amendment to this Agreement that
adversely affects the rights of Shareholders may be adopted at any time by an
instrument in writing signed by a majority of the then Trustees (or by an
officer of the Trust pursuant to a vote of a majority of such Trustees) when
authorized to do so by the vote in accordance with subsection (e) of Section 4.2
of Shareholders holding a majority of the Shares entitled to vote. Subject to
the foregoing, any such amendment shall be effective as provided in the
instrument containing the terms of such amendment or, if there is no provision
therein with respect to effectiveness, upon the execution of such instrument and
of a certificate (which may be a part of such instrument) executed by a trustee
or officer of the Trust to the effect that such amendment has been duly adopted.
Section 7.4 Filing of Copies; References; Headings. This Agreement and all
amendments shall be maintained in Trust offices for Shareholder inspection.
A copy of this Agreement and all amendments shall be filed with the
appropriate governmental offices as required, including the Secretary of the
Commonwealth of Massachusetts and the Boston City Clerk. Failure to make any
such filing shall not impair the effectiveness of this instrument or any such
amendment.
Anyone dealing with the Trust may rely on a certificate by an officer of
the Trust as to whether or not any such amendments have been made, as to the
identities of the Trustees and officers, and as to any matters in connection
with the Trust hereunder; and, with the same effect as if it were the original,
may rely on a copy certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and in any such
amendment, references to this instrument, and all expressions like "herein",
"hereof" and "hereunder" shall be deemed to refer to this instrument as a whole
as the same may be amended or affected by any such amendments.
As used in this Agreement the masculine gender shall include the feminine
and neuter genders. Headings are used for reference only and shall not affect
the meaning or construction of this Agreement. Headings are placed herein for
convenience of reference only and shall not be taken as a part hereof or control
or affect the meaning, construction or effect of this instrument. This
instrument may be executed in any number of counterparts each of which shall be
deemed an original.
Any reference to this document shall include all amendments.
Section 7.5 Applicable Law. This Agreement is made in The Commonwealth of
Massachusetts, and it is created under and is to be governed by and construed
and administered according to the laws of said Commonwealth, including the
Massachusetts Business Corporation Law as the same may be amended from time to
time, to which reference is made with the intention that matters not
specifically covered herein or as to which an ambiguity may exist shall be
resolved as if the Trust were a business corporation organized in Massachusetts,
but the reference to said Business Corporation Law is not intended to give the
Trust, the Trustees, the Shareholders or any other person any right, power,
authority or responsibility available only to or in connection with an entity
organized in corporate form. The Trust shall be of the type referred to in
Section 1 of Chapter 182 of the Massachusetts General Laws and of the type
commonly called a Massachusetts business trust, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
Section 7.6 Resident Agent. Mr. Edward S. Brewer, Jr., 101 Federal Street,
22nd Floor, Boston, Massachusetts for the purposes of complying with the laws of
The Commonwealth of Massachusetts is hereby appointed as resident agent for the
Trust within the Commonwealth of Massachusetts; and hereby is designated as its
attorney in the Commonwealth of Massachusetts upon whom may be served any
notice, process or pleading in any action or proceeding against the Trust. and
the undersigned does hereby consent that any such action or proceeding against
the Trust may be commenced in any court of competent jurisdiction and proper
venue within the State so designated by services of process upon said resident
agent with the same effect as if the Trust had been served lawfully with
process. It is requested that a copy of any notice, process or pleadings served
be mailed to Pauze' Funds at 14340 Torrey Chase Blvd., Suite 170, Houston, Texas
77014.
IN WITNESS WHEREOF, the undersigned have hereunto set their hand and seals
for themselves and their assigns, as of the date and year first above written.
/S/
- ------------------------------------ ----------------------------------------
Philip C. Pauze' David P. Manuel
/S/ /S/
- ------------------------------------ ----------------------------------------
Bobby D. Duncan Clark R. Mandigo
/S/
- ------------------------------------ ----------------------------------------
Paul J. Hilbert Frank E. Holmes
/S/ /S/
- ------------------------------------ ----------------------------------------
Gordon M. Anderson Scott B. Swanson
/S/
- ------------------------------------
Wayne F. Collins
STATE OF TEXAS )
)ss
COUNTY OF BEXAR )
Then personally appeared the above-named acknowledged the foregoing
instrument to be their free act and deed, before me, this _____ day of February
1996.
----------------------------------------
Notary Public
S E A L My commission expires
------------------
PAUZE' FUNDS
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (the "Agreement") is made as of the 13th day
of February, 1996 by and among Pauze Funds (the "Fund"), a Massachusetts
business trust, Pauze Swanson Capital Management, Co. (the "Adviser"), a Texas
corporation, and Declaration Distributors, Inc. (the "Distributor"), a
Pennsylvania corporation.
WITNESSETH THAT:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and has registered its shares of common stock (the "Shares") under the
Securities Act of 1933, as amended (the "1933 Act") in one or more distinct
series of Shares (the "Portfolio" or "Portfolios");
WHEREAS, the Adviser has been appointed investment adviser to the Fund;
WHEREAS, the Distributor is a broker-dealer registered with the U.S.
Securities and Exchange Commission (the "SEC") and a member in good standing of
the National Association of Securities Dealers, Inc. (the "NASD");
WHEREAS, the Fund has adopted a plan of distribution (the "Distribution
Plan") pursuant to Rule 12b-1 under the 1940 Act relating to the payment by the
Fund of distribution expenses; and
WHEREAS, the Fund, the Adviser and the Distributor desire to enter into
this Agreement pursuant to which the Distributor will provide distribution
services to the Portfolios of the Fund identified on Schedule A, as may be
amended from time to time, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Fund, the Adviser and the Distributor,
intending to be legally bound hereby, agree as follows:
1. APPOINTMENT OF DISTRIBUTOR. The Fund hereby appoints the Distributor as
its exclusive agent for the distribution of the Shares, and the Distributor
hereby accepts such appointment under the terms of this Agreement. The Fund
shall not sell any Shares to any person except to fill orders for the Shares
received through the Distributor; provided, however, that the foregoing
exclusive right shall not apply: (i) to Shares issued or sold in connection with
the merger or consolidation of any other investment company with the Fund or the
acquisition by purchase or otherwise of all or substantially all of the assets
of any investment company or substantially all of the outstanding shares of any
such company by the Fund; (ii) to Shares which may be offered by the Fund to its
shareholders for reinvestment of cash distributed from capital gains or net
investment income of the Fund; or (iii) to Shares which may be issued to
shareholders of other funds who exercise any exchange privilege set forth in the
Fund's Prospectus. Notwithstanding any other provision hereof, the Fund may
terminate, suspend, or withdraw the offering of the Shares whenever, in its sole
discretion, it deems such action to be desirable, and the Distributor shall
process no further orders for Shares after it receives notice of such
termination, suspension or withdrawal.
2. FUND DOCUMENTS. The Fund has provided the Administrator with properly
certified or authenticated copies of the following Fund related documents in
effect on the date hereof: the Fund's organizational documents, including Master
Trust Agreement and By-Laws; the Fund's Registration Statement on Form N-1A,
including all exhibits thereto; the Fund's most current Prospectus and Statement
of Additional Information; and resolutions of the Fund's Board of Trustees
authorizing the appointment of the Distributor and approving this Agreement. The
Fund shall promptly provide to the Distributor copies, properly certified or
authenticated, of all amendments or supplements to the foregoing. The Fund shall
provide to the Distributor copies of all other information which the Distributor
may reasonably request for use in connection with the distribution of Shares,
including, but not limited to, a certified copy of all financial statements
prepared for the Fund by its independent public accountants. The Fund shall also
supply the Distributor with such number of copies of the current Prospectus,
Statement of Additional Information and shareholder reports as the Distributor
shall reasonably request.
3. DISTRIBUTION SERVICES. The Distributor shall sell and repurchase Shares
as set forth below, subject to the registration requirements of the 1933 Act and
the rules and regulations thereunder, and the laws governing the sale of
securities in the various states ("Blue Sky Laws"):
a. The Distributor, as agent for the Fund, shall sell Shares to the
public against orders therefor at the public offering price, which shall be
the net asset value of the Shares then in effect.
b. The net asset value of the Shares shall be determined in the manner
provided in the then current Prospectus and Statement of Additional
Information. The net asset value of the Shares shall be calculated by the
Fund or by another entity on behalf of the Fund. The Distributor shall have
no duty to inquire into or liability for the accuracy of the net asset
value per Share as calculated.
c. Upon receipt of purchase instructions, the Distributor shall
transmit such instructions to the Fund or its transfer agent for
registration of the Shares purchased.
d. The Distributor, in light of Fund policies, procedures and
disclosure documents, shall also have the right to take, as agent for the
Fund, all actions which, in the Distributor's judgment, are necessary to
effect the distribution of Shares.
e. Nothing in this Agreement shall prevent the Distributor or any
"affiliated person" from buying, selling or trading any securities for its
or their own account or for the accounts of others for whom it or they may
be acting; provided, however, that the Distributor expressly agrees that it
shall not for its own account purchase any Shares of the Fund except for
investment purposes and that it shall not for its own account sell any such
Shares except for redemption of such Shares by the Fund, and that it shall
not undertake activities which, in its judgment, would adversely affect the
performance of its obligations to the Fund under this Agreement.
f. The Distributor, as agent for the Fund, shall repurchase Shares at
such prices and upon such terms and conditions as shall be specified in the
Prospectus.
4. DISTRIBUTION SUPPORT SERVICES. In addition to the sale and repurchase of
Shares, the Distributor shall perform the distribution support services set
forth on Schedule B attached hereto, as may be amended from time to time. Such
distribution support services shall include: Review of sales and marketing
literature and submission to the NASD; NASD record keeping; and quarterly
reports to the Fund's Board of Directors. Such distribution support services may
also include: fulfillment services, including telemarketing, printing, mailing
and follow-up tracking of sales leads; and licensing Adviser or Fund personnel
as registered representatives of the Distributor and related supervisory
activities.
5. REASONABLE EFFORTS. The Distributor shall use all reasonable efforts in
connection with the distribution of Shares. The Distributor shall have no
obligation to sell any specific number of Shares and shall only sell Shares
against orders received therefor. The Fund shall retain the right to refuse at
any time to sell any of its Shares for any reason deemed adequate by it.
6. COMPLIANCE. In furtherance of the distribution services being provided
hereunder, the Distributor and the Fund agree as follows:
a. The Distributor shall comply with the Rules of Fair Practice
of the NASD and the securities laws of any jurisdiction in which it
sells, directly or indirectly, Shares.
b. The Distributor shall require each dealer with whom the
Distributor has a selling agreement to conform to the applicable
provisions of the Fund's most current Prospectus and Statement of
Additional Information, with respect to the public offering price of
the Shares.
c. The Fund agrees to furnish to the Distributor sufficient
copies of any agreements, plans, communications with the public or
other materials it intends to use in connection with any sales of
Shares in a timely manner in order to allow the Distributor to review,
approve and file such materials with the appropriate regulatory
authorities and obtain clearance for use. The Fund agrees not to use
any such materials until so filed and cleared for use by appropriate
authorities and the Distributor.
d. The Distributor, at its own expense, shall qualify as a broker
or dealer, or otherwise, under all applicable Federal or state laws
required to permit the sale of Shares in such states as shall be
mutually agreed upon by the parties; provided, however that the
Distributor shall have no obligation to register as a broker or dealer
under the Blue Sky Laws of any jurisdiction if it determines that
registering or maintaining registration in such jurisdiction would be
uneconomical.
e. The Distributor shall not, in connection with any sale or
solicitation of a sale of the Shares, or make or authorize any
representative, service organization, broker or dealer to make, any
representations concerning the Shares except those contained in the
Fund's most current Prospectus covering the Shares and in
communications with the public or sales materials approved by the
Distributor as information supplemental to such Prospectus.
7. EXPENSES. Expenses shall be allocated as follows:
a. The Fund shall bear the following expenses: preparation,
setting in type, and printing of sufficient copies of the Prospectus
and Statement of Additional Information for distribution to existing
shareholders; preparation and printing of reports and other
communications to existing shareholders; distribution of copies of the
Prospectus, Statement of Additional Information and all other
communications to existing shareholders; registration of the Shares
under the Federal securities laws; qualification of the Shares for
sale in the jurisdictions mutually agreed upon by the Fund and the
Distributor; transfer agent/shareholder servicing agent services;
supplying information, prices and other data to be furnished by the
Fund under this Agreement; any original issue taxes or transfer taxes
applicable to the sale or delivery of the Shares or certificates
therefor; and items covered by the Distribution Plan.
b. To the extent not covered by the Distribution Plan, the
Adviser shall pay all other expenses incident to the sale and
distribution of the Shares sold hereunder, including, without
limitation: printing and distributing copies of the Prospectus,
Statement of Additional Information and reports prepared for use in
connection with the offering of Shares for sale to the public;
advertising in connection with such offering, including public
relations services, sales presentations, media charges, preparation,
printing and mailing of advertising and sales literature; data
processing necessary to support a distribution effort; distribution
and shareholder servicing activities of broker-dealers and other
financial institutions; filing fees required by regulatory authorities
for sales literature and advertising materials; any additional
out-of-pocket expenses incurred in connection with the foregoing and
any other costs of distribution.
8. COMPENSATION. For the distribution and distribution support services
provided by the Distributor pursuant to the terms of the Agreement, the Fund
shall, pursuant to the Distribution Plan, pay to the Distributor the
compensation set forth in Schedule A attached hereto, which schedule may be
amended from time to time. To the extent not covered by the Distribution Plan,
the Adviser shall pay to Distributor the compensation set forth in Schedule A
and shall also reimburse the Distributor for its out-of-pocket expenses related
to the performance of its duties hereunder, including, without limitation,
telecommunications charges, postage and delivery charges, record retention
costs, reproduction charges and traveling and lodging expenses incurred by
officers and employees of the Distributor. If this Agreement becomes effective
subsequent to the first day of the month or terminates before the last day of
the month, the Fund shall pay to the Distributor a distribution fee that is
prorated for that part of the month in which this Agreement is in effect. All
rights of compensation and reimbursement under this Agreement for services
performed by the Distributor as of the termination date shall survive the
termination of this Agreement.
9. USE OF DISTRIBUTOR'S NAME. The Fund shall not use the name of the
Distributor or any of its affiliates in the Prospectus, Statement of Additional
Information, sales literature or other material relating to the Fund in a manner
not approved prior thereto in writing by the Distributor; provided, however,
that the Distributor shall approve all uses of its and its affiliates' names
that merely refer in accurate terms to their appointments or that are required
by the Securities and Exchange Commission (the "SEC") or any state securities
commission; and further provided, that in no event shall such approval be
unreasonably withheld.
10. USE OF FUND'S NAME. Neither the Distributor nor any of its affiliates
shall use the name of the Fund or material relating to the Fund on any forms
(including any checks, bank drafts or bank statements) for other than internal
use in a manner not approved prior thereto in writing by the Fund; provided,
however, that the Fund shall approve all uses of its name that merely refer in
accurate terms to the appointment of the Distributor hereunder or that are
required by the SEC or any state securities commission; and further provided,
that in no event shall such approval be unreasonably withheld.
11. LIABILITY OF DISTRIBUTOR. The duties of the Distributor shall be
limited to those expressly set forth herein, and no implied duties are assumed
by or may be asserted against the Distributor hereunder. The Distributor may, in
connection with this Agreement employ agents or attorneys in fact, and shall not
be liable for any loss arising out of or in connection with its actions under
this Agreement, so long as it acts in good faith and with due diligence, and is
not negligent or guilty of any willful misfeasance, bad faith or gross
negligence, or reckless disregard of its obligations and duties under this
Agreement. As used in this Section 11 and in Section 12 (except the second
paragraph of Section 12), the term "Distributor" shall include directors,
officers, employees and other agents of the Distributor.
12. INDEMNIFICATION OF DISTRIBUTOR. The Fund shall indemnify and hold
harmless the Distributor against any and all liabilities, losses, damages,
claims and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and investigation expenses incident thereto) which the
Distributor may incur or be required to pay hereafter, in connection with any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which the Distributor may be involved as
a party or otherwise or with which the Distributor may be threatened, by reason
of the offer or sale of the Fund shares prior to the effective date of this
Agreement.
Any director, officer, employee, shareholder or agent of the Distributor
who may be or become an officer, Trustee, employee or agent of the Fund, shall
be deemed, when rendering services to the Fund or acting on any business of the
Fund (other than services or business in connection with the Distributor's
duties hereunder), to be rendering such services to or acting solely for the
Fund and not as a director, officer, employee, shareholder or agent, or one
under the control or direction of the Distributor, even though receiving a
salary from the Distributor.
The Fund agrees to indemnify and hold harmless the Distributor, and each
person, who controls the Distributor within the meaning of Section 15 of the
1933 Act, or Section 20 of the Securities Exchange Act of 1934, as amended
("1934 Act"), against any and all liabilities, losses, damages, claims and
expenses, joint or several (including, without limitation, reasonable attorneys'
fees and disbursements and investigation expenses incident thereto) to which
they, or any of them, may become subject under the 1933 Act, the 1934 Act, the
1940 Act or other Federal or state laws or regulations, at common law or
otherwise, insofar as such liabilities, losses, damages, claims and expenses (or
actions, suits or proceedings in respect thereof) arise out of or relate to any
untrue statement or alleged untrue statement of a material fact contained in a
Prospectus, Statement of Additional Information, supplement thereto, sales
literature or other written information prepared by the Fund and provided by the
Fund to the Distributor for the Distributor's use hereunder, or arise out of or
relate to any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading. The Distributor (or any person controlling the Distributor) shall
not be entitled to indemnity hereunder for any liabilities, losses, damages,
claims or expenses (or actions, suits or proceedings in respect thereof)
resulting from (i) an untrue statement or omission or alleged untrue statement
or omission made in the Prospectus, Statement of Additional Information, or
supplement, sales or other literature, in reliance upon and in conformity with
information furnished in writing to the Fund by the Distributor specifically for
use therein or (ii) the Distributor's own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties and obligations in the
performance of this Agreement.
The Distributor agrees to indemnify and hold harmless the Fund, and each
person who controls the Fund within the meaning of Section 15 of the 1933 Act,
or Section 20 of the 1934 Act, against any and all liabilities, losses, damages,
claims and expenses, joint or several (including, without limitation reasonable
attorneys' fees and disbursements and investigation expenses incident thereto)
to which they, or any of them, may become subject under the 1933 Act, the 1934
Act, the 1940 Act or other Federal or state laws, at common law or otherwise,
insofar as such liabilities, losses, damages, claims or expenses arise out of or
relate to any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus or Statement of Additional Information or any
supplement thereto, or arise out of or relate to actions or oral representations
of Distributor's associated persons and to any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, if based upon information furnished in
writing to the Fund by the Distributor specifically for use therein.
A party seeking indemnification hereunder (the "Indemnitee") shall give
prompt written notice to the party from whom indemnification is sought
("Indemnitor") of a written assertion or claim of any threatened or pending
legal proceeding which may be subject to indemnity under this Section; provided,
however, that failure to notify the Indemnitor of such written assertion or
claim shall not relieve the Indemnitor of any liability arising from this
Section. The Indemnitor shall be entitled, if it so elects, to assume the
defense of any suit brought to enforce a claim subject to this Indemnity and
such defense shall be conducted by counsel chosen by the Indemnitor and
satisfactory to the Indemnitee; provided, however, that if the defendants
include both the Indemnitee and the Indemnitor, and the Indemnitee shall have
reasonably concluded that there may be one or more legal defenses available to
it which are different from or additional to those available to the Indemnitor
("conflict of interest"), the Indemnitor shall not have the right to elect to
defend such claim on behalf of the Indemnitee, and the Indemnitee shall have the
right to select separate counsel to defend such claim on behalf of the
Indemnitee. In the event that the Indemnitor elects to assume the defense of any
suit pursuant to the preceding sentence and retains counsel satisfactory to the
Indemnitee, the Indemnitee shall bear the fees and expenses of additional
counsel retained by it, except for reasonable investigation costs which shall be
borne by the Indemnitor. If the Indemnitor (i) does not elect to assume the
defense of a claim, (ii) elects to assume the defense of a claim but chooses
counsel that is not satisfactory to the Indemnitee or (iii) has no right to
assume the defense of a claim because of a conflict of interest, the Indemnitor
shall advance or reimburse the Indemnitee, at the election of the Indemnitee,
reasonable fees and disbursements of any counsel retained by Indemnitee,
including reasonable investigation costs.
13. ADVISER PERSONNEL. The Adviser agrees that only its employees who are
registered representatives of the Distributor ("dual employees") or registered
representatives of another NASD member firm shall offer or sell Shares of the
Portfolios. The Adviser further agrees that the activities of any such employees
as registered representatives of the Distributor shall be limited to offering
and selling Shares. If there are dual employees, one employee of the Adviser
shall register as a principal of the Distributor and assist the Distributor in
monitoring the marketing and sales activities of the dual employees. The Adviser
shall maintain errors and omissions and fidelity bond insurance policies
providing reasonable coverage for its employees activities and shall provide
copies of such policies to the Distributor. The Adviser shall indemnify and hold
harmless the Distributor against any and all liabilities, losses, damages,
claims and expenses (including reasonable attorneys' fees and disbursements and
investigation costs incident thereto) arising from or related to the Adviser's
employees' activities as registered representatives, including, without
limitation, any and all such liabilities, losses, damages, claims and expenses
arising from or related to the breach by such employees of any rules or
regulations of the NASD or SEC.
14. FORCE MAJEURE. The Distributor shall not be liable for any delays or
errors occurring by reason of circumstances not reasonably foreseeable and
beyond its control, including, but not limited, to acts of civil or military
authority, national emergencies, work stoppages, fire, flood, catastrophe, acts
of God, insurrection, war, riot or failure of communication or power supply. In
the event of equipment breakdowns which are beyond the reasonable control of the
Distributor and not primarily attributable to the failure of the Distributor to
reasonably maintain or provide for the maintenance of such equipment, the
Distributor shall, at no additional expense to the Fund, take reasonable steps
in good faith to minimize service interruptions, but shall have no liability
with respect thereto.
15. SCOPE OF DUTIES. The Distributor and the Fund shall regularly consult
with each other regarding the Distributor's performance of its obligations and
its compensation under the foregoing provisions. In connection therewith, the
Fund shall submit to the Distributor at a reasonable time in advance of filing
with the SEC copies of any amended or supplemented Registration Statement of the
Fund (including exhibits) under the 1940 Act and the 1933 Act, and at a
reasonable time in advance of their proposed use, copies of any amended or
supplemented forms relating to any plan, program or service offered by the Fund.
Any change in such materials that would require any change in the Distributor's
obligations under the foregoing provisions shall be subject to the Distributor's
approval. In the event that a change in such documents or in the procedures
contained therein increases the cost or burden to the Distributor of performing
its obligations hereunder, the Distributor shall be entitled to receive
reasonable compensation therefore.
16. DURATION. This Agreement shall become effective as of the date first
above written, and shall continue in force for two years from that date and
thereafter from year to year, provided continuance is approved at least annually
by either (i) the vote of a majority of the Trustees of the Fund, or by the vote
of a majority of the outstanding voting securities of the Fund, and (ii) the
vote of a majority of those Trustees of the Fund who are not interested persons
of the Fund, and who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
the approval.
17. TERMINATION. This Agreement shall terminate as follows:
a. This Agreement shall terminate automatically in the event of its
assignment.
b. This Agreement shall terminate upon the failure to approve the
continuance of the Agreement after the initial two year term as set forth
in Section 16 above.
c. This Agreement shall terminate at any time upon a vote of the
majority of the Directors who are not interested persons of the Fund or by
a vote of the majority of the outstanding voting securities of the Fund,
upon not less than 60 days prior written notice to the Distributor.
d. The Distributor may terminate this Agreement upon not less than 60
days prior written notice to the Fund.
Upon the termination of this Agreement, the Fund shall pay to the
Distributor such compensation and out-of-pocket expenses as may be payable for
the period prior to the effective date of such termination. In the event that
the Fund designates a successor to any of the Distributor's obligations
hereunder, the Distributor shall, at the expense and direction of the Fund,
transfer to such successor all relevant books, records and other data
established or maintained by the Distributor pursuant to the foregoing
provisions.
Sections 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 17, 20, 21, 22, 23, 24, 25, 26
and 27 shall survive any termination of this Agreement.
18. AMENDMENT. The terms of this Agreement shall not be waived, altered,
modified, amended or supplemented in any manner whatsoever except by a written
instrument signed by the Distributor and the Fund and shall not become effective
unless its terms have been approved by the majority of the Trustees of the Fund
or by a "vote of majority of the outstanding voting securities" of the Fund and
by a majority of those Trustees who are not "interested persons" of the Fund or
any party to this Agreement.
19. NON-EXCLUSIVE SERVICES. The services of the Distributor rendered to the
Fund are not exclusive. The Distributor may render such services to any other
investment company.
20. DEFINITIONS. As used in this Agreement, the terms "vote of a majority
of the outstanding voting securities," "assignment," "interested person" and
"affiliated person" shall have the respective meanings specified in the 1940 Act
and the rules enacted thereunder as now in effect or hereafter amended.
21. CONFIDENTIALITY. The Distributor shall treat confidentially and as
proprietary information of the Fund all records and other information relating
to the Fund and prior, present or potential shareholders and shall not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except as may be required by
administrative or judicial tribunals or as requested by the Fund.
22. NOTICE. Any notices and other communications required or permitted
hereunder shall be in writing and shall be effective upon delivery by hand or
upon receipt if sent by certified or registered mail (postage prepaid and return
receipt requested) or by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or upon transmission if sent by
telex or facsimile (with request for immediate confirmation of receipt in a
manner customary for communications of such respective type and with physical
delivery of the communication being made by one or the other means specified in
this Section 22 as promptly as practicable thereafter). Notices shall be
addressed as follows:
(a) if to the Fund:
Pauze Funds
14340 Torrey Chase Blvd., Suite 170
Houston, Texas 77014
Attn: Philip C. Pauze, President and Trustee
(b) if to the Adviser:
Pauze Swanson Capital Management Co.
14340 Torrey Chase Blvd., Suite 170
Houston, Texas 77014
Attn: Philip C. Pauze, President
(c) if to the Distributor:
Declaration Distributors, Inc.
Suite 6160
555 North Lane
Conshohocken, PA 19428
Attn: Mr. Terence P. Smith, President
or to such other respective addresses as the parties shall designate by like
notice, provided that notice of a change of address shall be effective only upon
receipt thereof.
23. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
24. GOVERNING LAW. This Agreement shall be administered, construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania to the
extent that such laws are not preempted by the provisions of any law of the
United States heretofore or hereafter enacted, as the same may be amended from
time to time.
25. ENTIRE AGREEMENT. This Agreement (including the Exhibits attached
hereto) contains the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersedes all prior written or oral
agreements and understandings with respect thereto.
26. MISCELLANEOUS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction. This Agreement may be executed in three counterparts,
each of which taken together shall constitute one and the same instrument.
27. LIMITATION OF LIABILITY. The term "Pauze Funds" means and refers to the
Trustees from time to time serving under the Master Trust Agreement of the Trust
dated October 15, 1993, as the same may subsequently thereto have been, or
subsequently hereto be, amended. It is expressly agreed that obligations of the
Trust hereunder shall not be binding upon any Trustee, Shareholder, nominees,
officers, agents or employees of the Trust, personally, but bind only the assets
and property of the Trust, as provided in the Master Trust Agreement. The
execution and delivery of this Agreement have been authorized by the Trustees
and signed by an authorized officer of the Trust, acting as such, and neither
such authorization nor such execution and delivery shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the assets and property of the Trust as provided
in the Master Trust Agreement. The Master Trust Agreement is on file with the
Secretary of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
PAUZE FUNDS
By: /S/
----------------------------------------
Philip C. Pauze, President and Trustee
PAUZE SWANSON CAPITAL MANAGEMENT CO.
By: /S/
----------------------------------------
Philip C. Pauze, President
DECLARATION DISTRIBUTORS, INC.
By: /S/
---------------------------------------
Terence P. Smith, President
<PAGE>
SCHEDULE A
PAUZE FUNDS
Portfolio and Fee Schedule
Portfolios covered by Distribution Agreement:
Pauze U. S. Government Total Return Bond Fund
Fees for distribution and distribution support services on behalf of the
Portfolios:
Annual Fee $20,000
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SCHEDULE B
PAUZE FUNDS
Distribution Support Services
1. Review and submit for approval all advertising and promotional materials.
2. Maintain all books and records required by the NASD.
3. Monitor Distribution Plan(s) and report to Board of Trustees.
4. Prepare quarterly reports to Board of Trustees relating to distribution
activities.
5. Subject to approval of Distributor, license personnel as registered
representatives of the Distributor.
6. Telemarketing services (additional fees to be negotiated).
7. Fund fulfillment services, including sampling prospective shareholders
inquiries and related mailings (additional fees to be negotiated).
PAUZE' FUNDS
TRANSFER AGENCY AND SHAREHOLDER SERVICES AGREEMENT
THIS TRANSFER AGENCY AND SHAREHOLDER SERVICES AGREEMENT (the "Agreement")
is made as of the 13th day of February, 1996, by and between Pauze' Funds (the
"Fund"), a Massachusetts Business Trust (the "Trust"), and Declaration Service
Company (the "Transfer Agent"), a Pennsylvania corporation.
WITNESSETH THAT:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and has registered its shares of common stock (the "Shares") under the
Securities Act of 1933, as amended (the "1933 Act") in one or more distinct
series of Shares (the "Portfolio" or "Portfolios");
WHEREAS, the Transfer Agent is registered as a transfer agent under Section
17A of the Securities Exchange Act of 1934, as amended (the "1934 Act"); and
WHEREAS, the Fund and the Transfer Agent desire to enter into this
Agreement pursuant to which the Transfer Agent will provide transfer agent,
shareholder servicing agent and dividend disbursing agent services to the
Portfolios identified on Schedule A hereto, as may be amended from time to time
("Schedule A"), on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Fund and the Transfer Agent, intending to be
legally bound hereby, agree as follows:
1. APPOINTMENT OF TRANSFER AGENT. The Fund hereby appoints the Transfer
Agent as transfer agent, shareholder servicing agent and dividend disbursing
agent for all Shares of the Portfolios identified on Schedule A, and the
Transfer Agent hereby accepts such appointment under the terms of this
Agreement. The Transfer Agent shall issue, redeem and transfer shares, provide
related shareholder services, pay dividends and make other distributions, all as
set forth on Schedule B hereto, as may be amended from time to time ("Schedule
B"), and in accordance with the terms of this Agreement.
2. FUND DOCUMENTS. The Fund has provided the Transfer Agent with properly
certified or authenticated copies of the following Fund related documents in
effect on the date hereof: the Fund's organizational documents, including
Indenture of Trust and By-Laws; the Fund's Registration Statement on Form N-1A,
including all exhibits thereto; the Fund's Prospectus and Statement of
Additional Information; resolutions of the Fund's Board of Trustees authorizing
the appointment of the Transfer Agent and approving this Agreement; a
certificate signed by the Secretary of the Fund specifying the number of Shares
authorized, issued, and currently outstanding, the names and specimen signatures
of the officers of the Fund and the name and address of the legal counsel for
the Fund; and an opinion of counsel for the Fund with respect to the validity of
the authorized and outstanding Shares, whether such Shares are fully paid and
non-assessable and the status of such Shares under the 1933 Act (in other words,
that the Shares have been duly registered and that the Registration Statement
with respect to such Shares has become effective). The Fund shall promptly
furnish to the Transfer Agent copies, properly certified or authenticated, of
all additions, amendments or supplements to the foregoing Fund documents as well
as updated certificates and opinions relating to changes in the number of Shares
authorized, issued and outstanding. The Fund shall furnish to the Transfer Agent
copies of all other information and financial statements which the Transfer
Agent may reasonably request for use in connection with its duties under this
Agreement.
3. ISSUANCE, REDEMPTION AND TRANSFER OF SHARES. The Transfer Agent shall
follow the procedures for the issuance, redemption and transfer of Shares set
forth in this Section 3:
a. The Transfer Agent shall accept purchase orders and redemption
requests with respect to Shares on each Fund business day in accordance with the
most current Prospectus and Statement of Additional Information provided to the
Transfer Agent by the Fund pursuant to Section 2 hereof. The Fund shall provide
the Transfer Agent with sufficient advance notice to enable the Transfer Agent
to effect any changes in the purchase and redemption procedures set forth in the
Prospectus and Statement of Additional Information; provided, however, that in
no event shall such advance notice be less than 30 days.
b. If applicable, the Transfer Agent shall also accept with respect to
each Fund business day, at such times as are agreed upon from time to time by
the Transfer Agent and the Fund, a computer tape or electronic data transmission
consistent in all respects with the Transfer Agent's record format, as amended
from time to time, which is reasonably believed by the Transfer Agent to be
furnished by or on behalf of any servicing agent approved by the Fund
("Servicing Agent"). The Transfer Agent reserves the right to approve, in
advance, any Servicing Agent, which approval shall not be unreasonably withheld.
c. On each Fund business day, the Transfer Agent shall, as of the time
the Fund computes the net asset value of the Fund, issue to and redeem from the
accounts specified in a purchase order, redemption request, or computer tape or
electronic data transmission, the appropriate number of full and fractional
Shares based on the net asset value per Share specified in a written advice
received from the Fund on such Fund business day. Notwithstanding the foregoing,
if a redemption specified in a computer tape or electronic data transmission is
for a dollar value of Shares in excess of the dollar value of Shares in the
specified account, the Transfer Agent shall not effect such redemption in whole
or in part and shall within 24 hours orally advise the Servicing Agent which
supplied such tape of the discrepancy.
d. In connection with a reinvestment of a dividend or distribution of
Shares of the Fund, the Transfer Agent shall as of each Fund business day, as
specified in certified resolutions of the Fund's Board of Trustees, issue Shares
of the Fund based on the net asset value per Share of such Fund specified in a
written advice received from the Fund on such Fund business day.
e. On each Fund business day, the Transfer Agent shall supply the Fund
with a written statement specifying with respect to the immediately preceding
Fund business day: the total number of Shares of the Fund (including fractional
Shares) issued and outstanding at the opening of business on such day; the total
number of Shares of the Fund sold on such day; the total number of Shares of the
Fund redeemed on such day; the total number of Shares of the Fund issued, if
any, pursuant to Section 3d hereof; and the total number of Shares of the Fund
issued and outstanding.
f. In connection with each purchase and each redemption of Shares, the
Transfer Agent shall send such written statements as are prescribed by the
Federal securities laws applicable to the Fund or as described in the Prospectus
and Statement of Additional Information.
g. As of each Fund business day, the Transfer Agent shall furnish the
Fund with a written advice setting forth the number and dollar amount of Shares
to be redeemed on such Fund business day.
h. Upon receipt of a proper redemption request and moneys paid to it
by the Fund's custodian ("Custodian") in connection with a redemption of Shares,
the Transfer Agent shall cancel the redeemed Shares and after making appropriate
deduction for any withholding of taxes required by applicable law, (i) in the
case of a redemption of Shares pursuant to a redemption described in Section 3a
hereof, make payment in accordance with the Fund's redemption and payment
procedures described in the Prospectus and Statement of Additional Information,
and (ii) in the case of a redemption of Shares pursuant to a computer tape or
electronic data transmission described in Section 3b hereof, make payment by
directing a Federal Funds wire order to the account previously designated by the
Servicing Agent specified in said computer tape or electronic data transmission.
i. The Transfer Agent shall not be required to issue any Shares after
it has received from an officer of the Fund or from an appropriate Federal or
state authority written notification that the sale of Shares has been suspended
or discontinued, and the Transfer Agent shall be entitled to rely upon such
written notification.
j. Upon the issuance of any Shares in accordance with this Agreement,
the Transfer Agent shall not be responsible for the payment of any original
issue or other taxes required to be paid by the Fund in connection with such
issuance of any Shares.
k. Except as otherwise provided in this Agreement, the Transfer Agent
shall transfer or redeem Shares upon presentation to the Transfer Agent of
instructions properly endorsed for transfer or redemption, accompanied by such
documents as the Transfer Agent deems necessary to evidence the authority of the
person making such transfer or redemption, and bearing satisfactory evidence of
the payment of stock transfer taxes. The Transfer Agent shall have the right to
refuse to transfer or redeem Shares until it is satisfied that the instructions
are valid and genuine, and for that purpose it will require, unless otherwise
instructed in writing by an authorized officer of the Fund, a guarantee of
signature by an "Eligible Guarantor Institution" as that term is defined by Rule
17Ad-15 under the 1934 Act. The Transfer Agent shall also have the right to
refuse to transfer or redeem Shares until it is satisfied that the requested
transfer or redemption is legally authorized. The Transfer Agent shall not be
liable for its refusal to make transfers or redemptions which the Transfer
Agent, in its reasonable judgment, deems improper or unauthorized, or until it
is satisfied that there is no basis to any claims adverse to such transfer or
redemption. The Transfer Agent may, in effecting transfers and redemptions of
Shares, rely upon those provisions of the Uniform Commercial Code or other laws
relating to the transfer of securities, as the same may be amended from time to
time.
l. If instructed by the Fund the Transfer Agent shall issue
certificates representing Shares ("Certificates"). The Fund shall supply to the
Transfer Agent a sufficient number of blank Certificates and from time to time
shall supply additional blank Certificates upon the request of the Transfer
Agent. Such blank Certificates shall be signed manually or by facsimile
signature by the duly authorized officers of the Fund, and shall bear the
corporate seal or facsimile thereof of the Fund. Notwithstanding the death,
resignation or removal of any officer of the Fund, such executed Certificates
bearing the manual or facsimile signature of such officers shall remain valid
and may be issued to shareholders until the Fund provides to the Transfer Agent
a written advice to the contrary. The Transfer Agent may issue new Certificates
to replace Certificates represented to have been lost, destroyed or stolen upon
receiving an appropriate bond of indemnity satisfactory to the Transfer Agent,
and may issue new Certificates in exchange for and upon surrender of mutilated
Certificates. Except as otherwise provided in Section 3k hereof, the Transfer
Agent shall issue new Certificates to evidence transfers of Shares upon
surrender of outstanding Certificates in the form deemed by the Transfer Agent
to be properly endorsed for transfer with all necessary endorser's signatures
guaranteed by an Eligible Guarantor Institution.
4. Dividends and Distributions. The Transfer Agent shall pay dividends and
make other distributions in accordance with the following procedures:
a. The Fund shall furnish to the Transfer Agent certified resolutions
of its Board of Trustees, either (i) setting forth the date of the declaration
of a dividend or distribution, the date of accrual or payment, the record date
as of which shareholders entitled to payment or accrual shall be determined, the
amount per Share of such dividend or distribution, the payment date on which all
previously accrued and unpaid dividends are to be paid, and the total amount, if
any, payable to the Transfer Agent on such payment date, or (ii) authorizing the
declaration of dividends and distributions on a daily or other periodic basis.
b. Upon the mail date specified in such resolutions, the Fund shall,
in the case of a cash dividend or distribution, cause the Custodian to deposit
in an account in the name of the Transfer Agent on behalf of the Fund an amount
of cash, if any, sufficient for the Transfer Agent to make the payment,
specified in such resolution to the shareholders of record on the record date.
The Transfer Agent shall, upon receipt of any such cash, make payment of such
cash dividends or distributions to the shareholders of record as of the record
date by: (i) mailing a check, payable to the registered shareholder, to the
address of record or dividend mailing address, or (ii) wiring such amounts to
the accounts previously designated by a Servicing Agent, as the case may be. If
the Transfer Agent does not receive from the Custodian sufficient cash to make
payments of any cash dividend or distribution to all shareholders of the Fund as
of the record date, the Transfer Agent shall, upon notifying the Fund, withhold
payment to all shareholders of record as of the record date until sufficient
cash is provided to the Transfer Agent. In lieu of receiving from the Custodian
and paying the shareholders cash dividends or distributions, the Transfer Agent
may arrange for direct payment of cash dividends and distributions to
shareholders by the Custodian in accordance with such procedures and controls as
are mutually agreed upon from time to time by and among the Fund, the Transfer
Agent and the Custodian.
c. The Transfer Agent shall file such appropriate information returns
concerning the payment of dividends and distributions with the proper Federal,
state and local authorities as are required by law to be filed by the Fund, but
shall in no way be responsible for the collection or withholding of taxes due on
such dividends or distributions due to shareholders, except and only to the
extent required by applicable law.
5. RECORDKEEPING AND OTHER INFORMATION. The Transfer Agent shall create and
maintain all necessary records in accordance with all applicable laws, rules and
regulations, including, but not limited to, records identified on Schedule B
hereto and required by Section 31(a) of the 1940 Act and the rules thereunder,
as the same may be amended from time to time, relating to the various services
performed by it. All records shall be the property of the Fund at all times and
shall be available for inspection and use by the Fund. Where applicable, such
records shall be maintained by the Transfer Agent for the periods and in the
places required by Rule 31a-2 under the 1940 Act.
6. AUDIT, INSPECTION AND VISITATION. The Transfer Agent shall make
available during regular business hours all records and other data created and
maintained pursuant to this Agreement for reasonable audit and inspection by the
Fund or any person retained by the Fund. Upon reasonable notice by the Fund, the
Transfer Agent shall make available during regular business hours its facilities
and premises employed in connection with its performance of this Agreement for
reasonable visitation by the Fund, or any person retained by the Fund.
7. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. Except as otherwise
provided herein, the Fund assumes full responsibility for ensuring that the Fund
complies with all applicable requirements of the 1933 Act, the 1934 Act, the
1940 Act and rules thereunder, and any other applicable laws, rules and
regulations.
8. COMPENSATION. The Fund shall pay to the Transfer Agent as compensation
for services rendered hereunder the annual fee set forth in Schedule A. The fee
shall be calculated and accrued daily, and paid monthly. The Fund shall also
reimburse the Transfer Agent for its out-of-pocket expenses related to the
performance of its duties hereunder, including, without limitation,
telecommunications charges (such as toll-free lines and voice response system);
postage and delivery services; record retention costs (such as microfilm,
microfiche and off-site storage); reproduction charges; custom programming; and
traveling and lodging expenses incurred by officers and employees of the
Transfer Agent. The Fund shall pay the Transfer Agent's monthly invoices for
transfer agency fees and out-of-pocket expenses within 5 days of the respective
month-end. If this Agreement becomes effective subsequent to the first day of a
month or terminates before the last day of a month, the Fund shall pay the
Transfer Agent a transfer agency fee that is prorated for that part of the month
in which this Agreement is in effect. All rights of compensation and
reimbursement under this Agreement for services performed by the Transfer Agent
as of the termination date shall survive the termination of this Agreement.
9. APPOINTMENT OF AGENTS. The Transfer Agent may at any time or times in
its discretion appoint (and may at any time remove) other parties as its agent
to carry out such provisions of this Agreement as the Transfer Agent may from
time to time direct; provided, however, that the appointment of any such agent
shall not relieve the Transfer Agent of any of its responsibilities or
liabilities hereunder.
10. USE OF TRANSFER AGENT'S NAME. The Fund shall not use the name of the
Transfer Agent or any of its affiliates in any Prospectus, Statement of
Additional Information, sales literature or other material relating to the Fund
in a manner not approved prior thereto in writing by the Transfer Agent;
provided, however, that the Transfer Agent shall approve all uses of its and its
affiliates' names that merely refer in accurate terms to their appointments
hereunder or that are required by the Securities and Exchange Commission (the
"SEC") or a state securities commission; and further provided, that in no event
shall such approval be unreasonably withheld.
11. USE OF FUND'S NAME. Neither the Transfer Agent nor any of its
affiliates shall use the name of the Fund or material relating to the Fund on
any forms (including any checks, bank drafts or bank statements) for other than
internal use in a manner not approved prior thereto by the Fund; provided,
however, that the Fund shall approve all uses of its name that merely refer in
accurate terms to the appointment of the Transfer Agent hereunder or that are
required by the SEC or state securities commission; and further provided, that
in no event shall such approval be unreasonably withheld.
12. LIABILITY OF TRANSFER AGENT. The Transfer Agent's liability shall be
limited as follows:
a. The duties of the Transfer Agent shall be limited to those
expressly set forth herein, and no implied duties are assumed by or may be
asserted against the Transfer Agent hereunder. The Transfer Agent may, in
connection with this Agreement, employ agents or attorneys in fact, and shall
not be liable for any loss arising out of or in connection with its actions
under this Agreement so long as it acts in good faith with due diligence, and is
not negligent or guilty of any willful misconduct.
b. The Transfer Agent may consult counsel to the Fund or the Fund's
independent public accountants or other experts with respect to any matter
arising in connection with the Transfer Agent's duties, and the Transfer Agent
shall not be liable for any action taken or omitted by the Transfer Agent in
good faith in reliance on the oral or written advice of such counsel,
accountants or other experts.
c. The Transfer Agent shall not be liable for any action taken or
omitted by the Transfer Agent in reliance on the oral or written instruction,
authorization, approval or information provided to the Transfer Agent by any
person reasonably believed by the Transfer Agent to be authorized by the Fund to
give such instruction, authorization, approval or information.
d. Any person, even though also an officer, Trustee, employee or agent
of the Transfer Agent or any of its affiliates, who may be or become an officer
or Trustee of the Fund, shall be deemed, when rendering services to the Fund as
such officer or Trustee to be rendering such services to or acting solely for
the Fund and not as an officer, Trustee, employee or agent or one under the
control or direction of the Transfer Agent or any of its affiliates, even though
paid by one of those entities.
e. The Transfer Agent shall not be liable or responsible for any acts
or omissions of any predecessor transfer agent or any other persons having
responsibility for matters to which this Agreement relates prior to the
effective date of this Agreement nor shall the Transfer Agent be responsible for
reviewing any such act or omissions.
f. The Transfer Agent shall not be liable for any loss suffered by the
Fund or its shareholders in the event that a computer tape or electronic data
transmission from a Servicing Agent may not be processed by the Transfer Agent
for any reason beyond the reasonable control of the Transfer Agent, or if any of
the information on such tape or transmission is reasonably believed by the
Transfer Agent to be incorrect.
g. The Transfer Agent shall not be liable for any action taken or
omitted by the Transfer Agent in reliance upon the provisions of the Uniform
Commercial Code or other laws relating to the transfers of securities, as the
same may be amended from time to time.
h. The Transfer Agent shall not be liable for its refusal to transfer
or redeem Shares in accordance with Section 3k hereof.
i. The Transfer Agent shall not be liable for any improper dividend
payments or distributions made in reliance on certified resolutions of the
Fund's Board of Trustees. In addition, the Transfer Agent shall not be liable
for the determination of the rate or form of dividends or distributions due or
payable to the shareholders as set forth in the certified resolutions. The
Transfer Agent shall not be liable for any loss to the Fund resulting from
processing by the Transfer Agent of a dividend or distribution based on
incorrect information provided in the certified resolutions, and the Fund shall
pay to the Transfer Agent any and all costs, both direct and out-of-pocket,
incurred to remedy such error.
j. The Transfer Agent shall not be liable to the Fund with respect to
any redemption drafts processed in accordance with written redemption draft
procedures established by the Transfer Agent and the Fund; provided, however,
that notwithstanding anything to the contrary in such procedures, the Transfer
Agent shall not be liable for any material alteration to or forgery of any
endorsement, it being understood that the Transfer Agent's sole responsibility
with respect to inspecting redemption drafts is to use reasonable care to verify
the drawer's signature against signatures on file.
k. The Transfer Agent shall not be liable for permitting any person to
inspect shareholder records of the Fund, if it receives an opinion from its
counsel that there is a reasonable likelihood that the Transfer Agent will be
held liable for failure to permit access to such shareholder records. The
Transfer Agent shall promptly notify the Fund that such disclosure has been made
or is to be made.
l. The Transfer Agent shall be under no duty or obligation to inquire
into, and shall not be liable for: the legality of the issue or sale of any
Shares, the sufficiency of the amount to be received therefor, or the authority
of a Servicing Agent or of the Fund, to request such sale or issuance; the
legality of a transfer of Shares, or of a redemption of any Shares, the
propriety of the amount to be paid therefor, or the authority of the Servicing
Agent or the Fund to request such transfer or redemption; the legality of the
declaration of any dividend by the Fund, or the legality of the issue of any
Shares in payment of any stock dividends; or the legality of any
recapitalization or readjustment of Shares.
As used in this Section 12 (except Section 12e) and in Section 13, the
term "Transfer Agent" shall include Trustees, officers, employees and other
agents of the Transfer Agent).
13. INDEMNIFICATION. The Trust hereby agrees to indemnify and hold harmless
the Transfer Agent from and against all claims, demands, expenses (including
attorney's fees) and liabilities, whether with or without basis in fact or law,
of any and every nature which the Transfer Agent may sustain or incur or which
may be asserted against the Transfer Agent by any person of, or as a result of:
(i) any action taken or omitted to be taken by the Transfer Agent in good faith
in reliance upon any certificate, instrument, order or stock certificates
believed by it to be genuine and to be signed, countersigned or executed by any
duly authorized person, upon the oral instructions or written instructions of an
authorized person of the Trust or upon the opinion of legal counsel for the
Trust or its counsel; or (ii) any action taken or permitted to be taken by the
Transfer Agent in connection with its appointment in good faith in reliance upon
any law, act, regulation or interpretation of the same even though the same may
thereafter have been altered, changed, amended or repealed. However,
indemnification hereunder shall not apply to actions or omissions of the
Transfer Agent or its directors, officers, employees or agents in cases of its
own negligence, willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder. The right to indemnity hereunder shall include the
right to advancement of defense expenses in the event of any pending or
threatened litigation; provided, however, that the Transfer Agent shall agree
that any advancement of expenses shall be returned to the Fund if it is
ultimately determined by an administrative or judicial tribunal that the
expenses (and related liability, if any) resulted form the Transfer Agent's own
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties and obligations under this Agreement.
The Transfer Agent shall give prompt written notice to the Fund of a
written assertion or claim of any threatened or pending legal proceeding which
may be subject to indemnity under this Section; provided, however, that the
Transfer Agent's failure to notify the Fund of such threatened or pending legal
proceeding shall not operate to relieve the Fund of any liability arising
hereunder. The Fund shall be entitled, if it so elects, to assume the defense of
any claim subject to this Indemnity and such defense shall be conducted by
counsel chosen by the Fund and satisfactory to the Transfer Agent; provided,
however, that if the defendants include both the Transfer Agent and the Fund,
and the Transfer Agent shall have reasonably concluded that there may be one or
more legal defenses available to it which are different from or additional to
those available to the Fund ("conflict of interest"), the Fund shall not have
the right to elect to defend the claim on behalf of the Transfer Agent, and the
Transfer Agent shall have the right to select separate counsel to defend such
claim on behalf of the Transfer Agent. In the event that the Fund elects to
assume the defense of any claim pursuant to the preceding sentence and retains
counsel satisfactory to the Transfer Agent, the Transfer Agent shall bear the
fees and expenses of additional counsel retained by it, except for reasonable
investigation costs which shall be borne by the Fund. If the Fund (i) does not
elect to assume the defense of a claim, (ii) elects to assume the defense of a
claim but chooses counsel that is not satisfactory to the Transfer Agent, or
(iii) has no right to assume the defense of a claim because of a conflict of
interest, the Fund shall advance or reimburse the Transfer Agent, at the
election of the Transfer Agent, reasonable fees and expenses of any counsel
retained by the Transfer Agent, including reasonable investigation costs.
14. SCOPE OF DUTIES. The Transfer Agent and the Fund shall regularly
consult with each other regarding the Transfer Agent's performance of its
obligations and its compensation under the foregoing provisions. In connection
therewith, the Fund shall submit to the Transfer Agent at a reasonable time in
advance of filing with the SEC copies of any amended or supplemented
Registration Statement of the Fund (including exhibits) under the 1933 Act and
the 1940 Act, and, at a reasonable time in advance of their proposed use, copies
of any amended or supplemented forms relating to any plan, program or service
offered by the Fund. Any change in such materials that would require any change
in the Transfer Agent's obligations under the foregoing provisions shall be
subject to the Transfer Agent's approval. In the event that a change in such
documents or in the procedures contained therein increases the cost or burden to
the Transfer Agent of performing its obligations hereunder, the Transfer Agent
shall be entitled to receive reasonable compensation therefor.
15. DURATION. This Agreement shall become effective on the date first
written above and shall continue in force for two years from that date (the
"Initial Term"). Thereafter, this Agreement shall continue in force from year to
year (each a "Successive Term"), provided continuance after the Initial Term is
approved at least annually by (i) the vote of a majority of the Trustees of the
Fund and (ii) the vote of a majority of those Trustees of the Fund who are not
"interested persons" of the Fund, and who are not parties to this Agreement or
"interested persons" of any such party (as determined under the 1940 Act), cast
at a meeting called for the purpose of voting on the approval.
16. TERMINATION. This Agreement shall terminate as follows:
a. This Agreement shall terminate automatically in the event of
its assignment.
b. Either the Fund or the Transfer Agent may terminate this Agreement
without penalty prior to the commencement of any Successive Term by providing to
the other party 90 days prior written notice of such termination.
c. Either party (the "terminating party") may immediately terminate
this Agreement during the Initial Term or any Successive Term in the event of a
material breach of this Agreement by the other party (the "breaching party"),
provided that the terminating party has given to the breaching party notice of
such breach and the breaching party has not remedied such breach within 45 days
after receipt of such notice.
Upon the termination of this Agreement, the Fund shall pay to the Transfer
Agent such compensation and out-of-pocket expenses as may be payable for the
period prior to the effective date of such termination. In the event that the
Fund designates a successor to any of the Transfer Agent's obligations
hereunder, the Transfer Agent shall, at the expense and direction of the Fund,
transfer to such successor all relevant books, records and other data
established or maintained by the Transfer Agent under the foregoing provisions.
Sections 8, 10, 11, 12, 13, 16, 17, 21, 22, 23, 24, 25 and 26 shall
indefinitely survive any termination of this Agreement.
17. FORCE MAJEURE. The Transfer Agent shall not be liable for any delays or
errors in the performance of its obligations hereunder occurring by reason of
circumstances not reasonably foreseeable and beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot or
failure of communication or power supply. In the event of equipment breakdowns
which are beyond the reasonable control of the Transfer Agent and not primarily
attributable to the failure of the Transfer Agent to reasonably maintain or
provide for the maintenance of such equipment, the Transfer Agent shall, at no
additional expense to the Fund, take reasonable steps in good faith to minimize
service interruptions, but shall have no liability with respect thereto.
18. AMENDMENT. The terms of this Agreement shall not be waived, altered,
modified, amended or supplemented in any manner whatsoever except by a written
instrument signed by the Transfer Agent and the Fund.
19. NON-EXCLUSIVE SERVICES. The services of the Transfer Agent rendered
to the Fund are not exclusive. The Transfer Agent may render such services to
any other investment company and have other businesses and interests.
20. DEFINITIONS. As used in this Agreement, the terms "assignment" and
"interested person" shall have the respective meanings specified in the 1940 Act
and rules enacted thereunder as now in effect or hereafter amended.
21. CONFIDENTIALITY. The Transfer Agent shall treat confidentially and as
proprietary information of the Fund all records and other information relating
to the Fund and prior, present or potential shareholders and shall not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except as may be required by
administrative or judicial tribunals or as requested by the Fund.
22. Notice. Any notices and other communications required or permitted
hereunder shall be in writing and shall be effective upon delivery by hand or
upon receipt if sent by certified or registered mail (postage prepaid and return
receipt requested) or by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or upon transmission if sent by
telex or facsimile (with request for immediate confirmation of receipt in a
manner customary for communications of such respective type and with physical
delivery of the communication being made by one or the other means specified in
this Section 21 as promptly as practicable thereafter). Notices shall be
addressed as follows:
(a) if to the Fund:
Pauze' Funds
C/O Pauze' Capital Management Co.
14340 Torrey Chase Blvd., Suite 170
Houston, TX 77014-1024
ATTN: Mr. Philip C. Pauze'
President and Trustee
(b) if to the Transfer Agent:
Declaration Services Company
Suite 6160
555 North Lane
Conshohocken, PA 19428
Attn: Mr. Terence Smith, President
or to such other respective addresses as the Fund or the Transfer Agent shall
designate by like notice, provided that notice of a change of address shall be
effective only upon receipt thereof.
23. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
24. GOVERNING LAW. This Agreement shall be administered, construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania to the
extent that such laws are not preempted by the provisions of any law of the
United States heretofore or hereafter enacted, as the same may be amended from
time to time.
25. ENTIRE AGREEMENT. This Agreement (including the Exhibits attached
hereto) contains the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersedes all prior written or oral
agreements and understandings with respect thereto.
26. MISCELLANEOUS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction. This Agreement may be executed in two counterparts,
each of which taken together shall constitute one and the same instrument.
27. LIMITATION OF LIABILITY. The term "Pauze' Funds" means and refers to
the Trustees from time to time serving under the Master Trust Agreement of the
Trust dated October 15, 1993, as the same may subsequently thereto have been, or
subsequently hereto be, amended. It is expressly agreed that obligations of the
Trust hereunder shall not be binding upon any Trustee, Shareholder, nominees,
officers, agents or employees of the Trust, personally, but bind only the assets
and property of the Trust, as provided in the Master Trust Agreement. The
execution and delivery of this Agreement have been authorized by the Trustees
and signed by an authorized officer of the Trust, acting as such, and neither
such authorization nor such execution and delivery shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the assets and property of the Trust as provided
in the Master Trust Agreement. The Master Trust Agreement is on file with the
Secretary of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
Pauze' Funds
By: /S/
-------------------------------------------------
Philip C. Pauze', President and Trustee
DECLARATION SERVICE COMPANY
By: /S/
-------------------------------------------------
Terence P. Smith, President
<PAGE>
SCHEDULE A
Pauze' Funds
Portfolio and Fee Schedule
Portfolios covered by Transfer Agency and Shareholder Services Agreement:
Pauze' U.S. Government Total Return Bond Fund
Fees for Transfer Agent and Shareholder Services
on behalf of the Portfolios:
System set-up, conversion of records, Time & Materials
transfer of historical records from prior
transfer agent.
Transfer Agent, Dividend Disbursing & $18 Annual per account
Shareholder Services Minimum Fee: $18,000 1st Year
21,000 2nd Year
24,000 thereafter
(Note: Transfer Agent/ Shareholder Services fees are charged on a relationship
basis regardless of number of portfolios in Fund)
Plus standard out-of-pocket expenses including (but not limited to): postage,
courier, telephone line, travel, statement and confirmation costs, Fund specific
costs related to Fund/SERV and Networking, printing, bank service charges, wire
charges, and other standard miscellaneous items.
<PAGE>
SCHEDULE B
Transfer Agent, Shareholders Servicing Agent and
Dividend Disbursing Agent Services provided by Declaration Services Company
1. Examine and process new accounts, subsequent payments, liquidations,
exchanges, transfers, telephone transactions, check redemptions, automatic
withdrawals, and wire order trades.
2. Reinvest or pay dividends and make other distributions.
3. Answer investor and dealer telephone and/or written inquiries, except as
otherwise agreed by the Transfer Agent and the Fund.
4. Process and confirm address changes.
5. Process standard account record changes as required, i.e. Dividend Codes,
etc.
6. Microfilm and/or store source documents for transactions, such as account
applications and correspondence.
7. Perform backup withholding for those accounts in accordance with Federal
regulations.
8. Solicit missing taxpayer identification numbers.
9. Provide remote access inquiry to Fund records via Fund supplied hardware
(Fund responsible for connection line and monthly fee).
10. Maintain the following shareholder information in such a manner as the
Transfer Agent shall determine:
a. Name and address, including zip code.
b. Balance of Shares.
c. Number of Shares, issuance date of each Share outstanding and
cancellation date of each Share no longer outstanding, if issued.
d. Balance of dollars available for redemption.
e. Dividend code (daily accrual, monthly reinvest, monthly cash or
quarterly cash).
f. Type of account code.
g. Establishment date indicating the date an account was opened, carrying
forward pre-conversion data as available.
h. Original establishment date for accounts opened by exchange.
i. W-9 withholding status and periodic reporting.
j. State of residence code.
k. Social security or taxpayer identification number, and indication of
certification.
l. Historical transactions on the account for the most recent 18 months,
or other period as mutually agreed to from time to time.
m. Indication as to whether phone transaction can be accepted for this
account. Beneficial owner code, i.e. male, female, joint tenant, etc.
11. Provide the following reports and statements:
a. Prepare daily journals for Fund reflecting all Shares and dollar
activity for the previous day.
b. Supply information monthly for Fund's preparation of Blue Sky
reporting.
c. Supply monthly purchase, redemption and liquidation information for
use in Fund's N-SAR report.
d. Provide monthly average daily balance reports for Fund.
e. Prepare and mail copies of summary statements to dealers and
investment advisers.
f. Mail transaction confirmation statements daily to investors.
g. Address and mail four periodic financial reports (material must be
adaptable to Transfer Agent's mechanical equipment as reasonably
specified by the Transfer Agent).
h. Mail periodic statement to investors.
i. Compute, prepare and furnish all necessary reports to governmental
authorities: Forms 1099R, 1099DIV, 1099B, 1042 and 1042S.
j. Enclose various marketing material as designated by the Fund in
statement mailings, i.e. monthly and quarterly statements (material
must be adaptable to mechanical equipment as reasonably specified by
the Transfer Agent).
12. Prepare and mail confirmation statements to dealers daily.
13. Prepare certified list of stockholders for proxy mailing.
PAUZE' FUNDS
ACCOUNTING SERVICES AGREEMENT
THIS ACCOUNTING SERVICES AGREEMENT (the "Agreement") is made as of the 13th
day of February, 1996, by and between PAUZE' FUNDS (the "Fund"), a Massachusetts
Business Trust (the "Trust"), and DECLARATION SERVICE COMPANY (the "Accounting
Services Agent"), a Pennsylvania corporation.
WITNESSETH THAT:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and is registering its shares of common stock under the Securities Act of 1933,
as amended (the "1933 Act") in one or more distinct series of shares (the
"Portfolio" or "Portfolios");
WHEREAS, the Fund and the Accounting Services Agent desire to enter into
this Agreement pursuant to which the Accounting Services Agent will provide
portfolio accounting services to the Portfolios of the Fund identified on
Schedule A hereto, as may be amended from time to time, on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Fund and the Accounting Services Agent,
intending to be legally bound hereby, agree as follows
1. APPOINTMENT OF ACCOUNTING SERVICES AGENT. The Fund hereby appoints the
Accounting Services Agent to perform the services described in this Agreement
for the Portfolios identified on Schedule A, and the Accounting Services Agent
hereby accepts such appointment. The Accounting Services Agent shall act under
such appointment pursuant to the terms and conditions hereinafter set forth.
2. FUND DOCUMENTS. The Fund has provided to the Accounting Services Agent,
properly certified or authenticated copies of the following Fund related
documents in effect on the date hereof: the Fund's organizational documents,
including Indenture of Trust and By-Laws; the Fund's Registration Statement on
Form N-1A, including all exhibits thereto; the Fund's Prospectus and Statement
of Additional Information; all contracts with the Fund's investment adviser,
custodian, administrator, transfer agent/shareholder servicing agent, and
distributor; if applicable, notice filed with or granted by the Commodity
Futures Trading Commission relating to the Fund's status as a commodity pool
operator; and resolutions of the Fund's Board of Trustees authorizing the
appointment of the Accounting Services Agent and approving this Agreement
(members of the Board of Trustees being referred to herein as "Trustees"). The
Fund shall promptly provide to the Accounting Services Agent copies, properly
certified or authenticated, of all additions, amendments or supplements to the
foregoing, if any.
3. PORTFOLIO ACCOUNTING SERVICES. The Accounting Services Agent shall
provide the portfolio accounting services set forth on Schedule B hereto, as may
be amended from time to time. The Fund shall provide, and shall cause its
investment adviser, custodian, transfer agent/shareholder servicing agent,
distributor, legal counsel and independent public accountants to cooperate with
the Accounting Services Agent and to provide it with, such information,
documents and advice as the Accounting Services Agent may reasonably request in
order to enable the Accounting Services Agent to perform its duties hereunder.
4. RECORDKEEPING AND OTHER INFORMATION. The Accounting Services Agent shall
create and maintain all necessary records in accordance with all applicable
laws, rules and regulations, including, but not limited to, records required by
Section 31(a) of the 1940 Act and the rules thereunder, as the same may be
amended from time to time, relating to the various services performed by it and
not otherwise created and maintained by another party pursuant to contract with
the Fund. All records shall be the property of the Fund at all times and shall
be available for inspection and use by the Fund. Where applicable, such records
shall be maintained by the Accounting Services Agent for the periods and in the
places required by Rule 31a-2 under the 1940 Act.
5. AUDIT, INSPECTION AND VISITATION. The Accounting Services Agent shall
make available during regular business hours all records and other data created
and maintained pursuant to this Agreement for reasonable audit and inspection by
the Fund or any person retained by the Fund. Upon reasonable notice by the Fund,
the Accounting Services Agent shall make available during regular business hours
its facilities and premises employed in connection with its performance of this
Agreement for reasonable visitation by the Fund, or any person retained by the
Fund.
6. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. Except as otherwise
provided herein, the Fund assumes full responsibility for ensuring that the Fund
complies with all applicable requirements of the 1933 Act, the Securities
Exchange Act of 1934, as amended, the 1940 Act and the rules thereunder, and any
other applicable laws, rules and regulations.
7. COMPENSATION. The Fund shall pay to the Accounting Services Agent as
compensation for services rendered hereunder the annual accounting services fee
set forth in Schedule A. The fee shall be calculated and accrued daily, and paid
monthly. The Fund shall also reimburse the Accounting Services Agent for its
out-of-pocket expenses related to the performance of its duties hereunder,
including, without limitation, telecommunications charges, postage and delivery
services, record retention costs, reproduction charges and price quotation
costs. The Fund shall pay the Accounting Services Agent's monthly invoices for
accounting services fees and out-of-pocket expenses within five days of the
respective month-end. If this Agreement becomes effective subsequent to the
first day of a month or terminates before the last day of a month, the Fund
shall pay the Accounting Services Agent an accounting services fee that is
prorated for that part of the month in which this Agreement is in effect. All
rights of compensation and reimbursement under this Agreement for services
performed by the Accounting Services Agent as of the termination date shall
survive the termination of this Agreement.
8. APPOINTMENT OF AGENTS. The Accounting Services Agent may at any time or
times in its discretion appoint (and may at any time remove) other parties as
its agent to carry out such provisions of this Agreement as the Accounting
Services Agent may from time to time direct; provided, however, that the
appointment of any such agent shall not relieve the Accounting Services Agent of
any of its responsibilities or liabilities hereunder.
9. USE OF ACCOUNTING SERVICES AGENT'S NAME. The Fund shall not use the name
of the Accounting Services Agent or any of its affiliates in the Prospectus,
Statement of Additional Information, sales literature or other material relating
to the Fund in a manner not approved prior thereto in writing by the Accounting
Services Agent; provided, however, that the Accounting Services Agent shall
approve all uses of its and its affiliates' names that merely refer in accurate
terms to their appointments or that are required by the Securities and Exchange
Commission (the "SEC") or any state securities commission; and further provided,
that in no event shall such approval be unreasonably withheld.
10. USE OF FUND'S NAME. Neither the Accounting Services Agent nor any of
its affiliates shall use the name of the Fund or material relating to the Fund
on any forms (including any checks, bank drafts or bank statements) for other
than internal use in a manner not approved prior thereto in writing by the Fund;
provided, however, that the Fund shall approve all uses of its name that merely
refer in accurate terms to the appointment of the Accounting Services Agent
hereunder or that are required by the SEC or any state securities commission;
and further provided, that in no event shall such approval be unreasonably
withheld.
11. LIABILITY OF ACCOUNTING SERVICES AGENT. The duties of the Accounting
Services Agent shall be limited to those expressly set forth herein, and no
implied duties are assumed by or may be asserted against the Accounting Services
Agent hereunder. The Accounting Services Agent may, in connection with this
Agreement, employ agents or attorneys in fact, and shall not be liable for any
loss arising out of or in connection with its actions under this Agreement so
long as it acts in good faith and with due diligence, and is not negligent or
guilty of any willful misconduct. The Accounting Services Agent may consult
counsel to the Fund or the Fund's independent public accountants or other
experts with respect to any matter arising in connection with the Accounting
Services Agent's duties, and the Accounting Services Agent shall not be liable
for any action taken or omitted by the Accounting Services Agent in good faith
in reliance on the oral or written advice of such counsel, accountants or other
experts. The Accounting Services Agent shall not be liable for any action taken
or omitted in reliance on the oral or written instruction, authorization,
approval or information provided to the Accounting Services Agent by any person
reasonably believed by the Accounting Services Agent to be authorized by the
Fund to give such instruction, authorization, approval or information. The
Accounting Services Agent shall not be liable for any loss, liability, damage or
cost arising out of the inaccuracy of prices quoted or corporate action
information supplied by any pricing service or the Fund and used by the
Accounting Services Agent in calculating the daily net asset value of the Fund.
Moreover, the Accounting Services Agent shall have no responsibility or duty to
include information or valuations to be provided by the Fund in any computation
unless and until it is timely supplied to the Accounting Services Agent in
useful form and shall have no duty to gather or record corporate action
information not supplied by the Fund, custodian or pricing service. The
Accounting Services Agent shall not be liable or responsible for any acts or
omissions of any predecessor accounting services agent or any other persons
having responsibility for matters to which this Agreement relates prior to the
effective date of this Agreement nor shall the Accounting Services Agent be
responsible for reviewing any such acts or omissions. Any person, even though
also an officer, trustee, employee or agent of the Accounting Services Agent or
any of its affiliates, who may be or become an officer or Trustee of the Fund,
shall be deemed, when rendering services to the Fund as such officer or Trustee
to be rendering such services to or acting solely for the Fund and not as an
officer, trustee, employee or agent or one under the control or direction of the
Accounting Services Agent or any of its affiliates, even though paid by one of
those entities. As used in this Section 12 (except the preceding sentence) and
in Section 13, the term "Accounting Services Agent" shall include trustees,
officers, employees and other agents of the Accounting Services Agent.
12. INDEMNIFICATION. The Trust hereby agrees to indemnify and hold harmless
the Accounting Services Agent from and against all claims, demands, expenses
(including attorney's fees) and liabilities, whether with or without basis in
fact or law, of any and every nature which the Accounting Services Agent may
sustain or incur or which may be asserted against the Accounting Services Agent
by any person by reason of, or as a result of: (i) any action taken or omitted
to be taken by the Accounting Services Agent in good faith in reliance upon any
certificate, instrument, order or stock certificate believed by it to be genuine
and to be signed, countersigned or executed by any duly authorized person, upon
the oral instructions or written instructions of an authorized person of the
Trust or upon the opinion of legal counsel for the Trust or its counsel; or (ii)
any action taken or permitted to be taken by the Accounting Services Agent in
connection with its appointment in good faith in reliance upon any law, act,
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended or repealed. However, indemnification
hereunder shall not apply to actions or omissions of the Accounting Services
Agent or its directors, officers, employees or agents in cases of its own
negligence, willful misconduct, bad faith, or reckless disregard of its or their
own duties hereunder. The right to indemnity hereunder shall include the right
to advancement of defense expenses in the event of any pending or threatened
litigation; provided, however, that the Accounting Services Agent shall agree
that any advancement of expenses shall be returned to the Fund if it is
ultimately determined by an administrative or judicial tribunal that the
expenses (and related liability, if any) resulted from the Administrator's own
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties and obligations under this Agreement.
The Accounting Services Agent shall give prompt written notice to the Fund
of a written assertion or claim of any threatened or pending legal proceeding
which may be subject to indemnity under this Section; provided, however, that
failure to notify the Fund of such written assertion or claim shall not operate
to relieve the Fund of any liability arising hereunder. The Fund shall be
entitled, if it so elects, to assume the defense of any suit brought to enforce
a claim subject to this Indemnity, and such defense shall be conducted by
counsel chosen by the Fund and satisfactory to the Accounting Services Agent;
provided, however, that if the defendants include both the Accounting Services
Agent and the Fund, and the Accounting Services Agent shall have reasonably
concluded that there may be one or more legal defenses available to it which are
different from or additional to those available to the Fund ("conflict of
interest"), the Fund shall not have the right to elect to defend such claim on
behalf of the Accounting Services Agent, and the Accounting Services Agent shall
have the right to select separate counsel to defend such claim on behalf of the
Accounting Services Agent. In the event that the Fund elects to assume the
defense of any claim pursuant to the preceding sentence and retains counsel
satisfactory to the Accounting Services Agent, the Accounting Services Agent
shall bear the fees and expenses of additional counsel retained by it, except
for reasonable investigation costs which shall be borne by the Fund. If the Fund
(i) does not elect to assume the defense of a claim, (ii) elects to assume the
defense of a claim but chooses counsel that is not satisfactory to the
Accounting Services Agent, or (iii) has no right to assume the defense of a
claim because of a conflict of interest, the Fund shall advance or reimburse the
Accounting Services Agent, at the election of the Accounting Services Agent,
reasonable fees and expenses of any counsel retained by the Accounting Services
Agent, including reasonable investigation costs.
13. SCOPE OF DUTIES. The Accounting Services Agent and the Fund shall
regularly consult with each other regarding the Accounting Services Agent's
performance of its obligations and its compensation under the foregoing
provisions. In connection therewith, the Fund shall submit to the Accounting
Services Agent at a reasonable time in advance of filing with the SEC copies of
any amended or supplemented Registration Statement of the Fund (including
exhibits) under the 1940 Act and the 1933 Act, and, at a reasonable time in
advance of their proposed use, copies of any amended or supplemented forms
relating to any plan, program or service offered by the Fund. Any change in such
materials that would require any change in the Accounting Services Agent's
obligations under the foregoing provisions shall be subject to the Accounting
Services Agent's approval. In the event that a change in such documents or in
the procedures contained therein increases the cost or burden to the Accounting
Services Agent of performing its obligations hereunder, the Accounting Services
Agent shall be entitled to receive reasonable compensation therefor.
14. DURATION. This Agreement shall become effective as of the date first
written above and shall continue in force for two years from that date (the
"Initial Term"). Thereafter, this Agreement shall continue in force from year to
year (each a "Successive Term"), provided continuance after the Initial Term is
approved at least annually by (i) the vote of a majority of the Trustees of the
Fund and (ii) the vote of a majority of those Trustees of the Fund who are not
"interested persons" of the Fund, and who are not parties to this Agreement or
"interested persons" of any such party, cast at a meeting called for the purpose
of voting on the approval.
15. TERMINATION. This Agreement shall terminate as follows:
a. This Agreement shall terminate automatically in the event of its
assignment.
b. Either the Fund or the Accounting Services Agent may terminate this
Agreement without penalty prior to the commencement of any Successive
Term by providing to the other party 90 days prior written notice of
such termination.
c. Either party (the "terminating party") may terminate this Agreement
during the Initial Term or any Successive Term in the event of a
material breach of this Agreement by the other party (the "breaching
party"), provided that the terminating party has given to the
breaching party notice of such breach, and the breaching party has not
remedied such breach within 45 days after receipt of such notice.
Upon the termination of this Agreement, the Fund shall pay to the
Accounting Services Agent such compensation and out-of-pocket expenses as may be
payable for the period prior to the effective date of such termination. In the
event that the Fund designates a successor to any of the Accounting Services
Agent's obligations hereunder, the Accounting Services Agent shall, at the
expense and direction of the Fund, transfer to such successor all relevant
books, records and other data established or maintained by the Accounting
Services Agent under the foregoing provisions.
Sections 7, 9, 10, 11, 12, 15, 16, 20, 21, 22, 23, 24 and 25 shall
indefinitely survive any termination of this Agreement.
16. FORCE MAJEURE. The Accounting Services Agent shall not be liable for
any delays or errors in the performance of its obligations hereunder occurring
by reason of circumstances not reasonably foreseeable and beyond its control,
including, but not limited to, acts of civil or military authority, national
emergencies, work stoppages, fire, flood, catastrophe, acts of God,
insurrection, war, riot or failure of communication or power supply. In the
event of equipment breakdowns which are beyond the reasonable control of the
Accounting Services Agent and not primarily attributable to the failure of the
Accounting Services Agent to reasonably maintain or provide for the maintenance
of such equipment, the Accounting Services Agent shall, at no additional expense
to the Fund, take reasonable steps in good faith to minimize service
interruptions, but shall have no liability with respect thereto.
17. AMENDMENT. The terms of this Agreement shall not be waived, altered,
modified, amended or supplemented in any manner whatsoever except by a written
instrument signed by the Accounting Services Agent and the Fund.
18. NON-EXCLUSIVE SERVICES. The types of services rendered by the
Accounting Services Agent hereunder are not exclusive. The Accounting Services
Agent may render such services to any other investment company and have other
businesses and interests.
19. DEFINITIONS. As used in this Agreement, the terms "assignment" and
"interested person" shall have the respective meanings specified in the 1940 Act
and the rules enacted thereunder as now in effect or hereafter amended.
20. CONFIDENTIALITY. The Accounting Services Agent shall treat
confidentially and as proprietary information of the Fund all records and other
information relating to the Fund and prior, present or potential shareholders
and shall not use such records and information for any purpose other than
performance of its responsibilities and duties hereunder, except as may be
required by administrative or judicial tribunals or as requested by the Fund.
21. NOTICE. Any notices and other communications required or permitted
hereunder shall be in writing and shall be effective upon delivery by hand or
upon receipt if sent by certified or registered mail (postage prepaid and return
receipt requested) or by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or upon transmission if sent by
telex or facsimile (with request for immediate confirmation of receipt in a
manner customary for communications of such respective type and with physical
delivery of the communication being made by one or the other means specified in
this Section 21 as promptly as practicable thereafter). Notices shall be
addressed as follows:
(a) if to the Fund:
Pauze' Funds
C/O Pauze' Capital Management Co.
14340 Torrey Chase Blvd., Suite 170
Houston, TX 77014-1024
ATTN: Mr. Philip C. Pauze'
President and Trustee
(b) if to the Accounting Services Agent:
Declaration Service Company
Suite 6160
555 North Lane
Conshohocken, PA 19428
Attn: Mr. Terence Smith, President
or to such other respective addresses as the Fund or the Accounting Services
Agent shall designate by like notice, provided that notice of a change of
address shall be effective only upon receipt
thereof.
22. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
23. GOVERNING LAW. This Agreement shall be administered, construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania to the
extent that such law is not preempted by the provisions of any law of the United
States heretofore or hereafter enacted, as the same may be amended from time to
time.
24. ENTIRE AGREEMENT. This Agreement (including the Exhibits attached
hereto) contains the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersedes all prior written or oral
agreements and understandings with respect thereto.
25. MISCELLANEOUS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction. This Agreement may be executed in two counterparts,
each of which taken together shall constitute one and the same instrument.
26. LIMITATION OF LIABILITY. The term "Pauze' Funds" means and refers to
the Trustees from time to time serving under the Master Trust Agreement of the
Trust dated October 15, 1993, as the same may subsequently thereto have been, or
subsequently hereto be, amended. It is expressly agreed that obligations of the
Trust hereunder shall not be binding upon any Trustee, Shareholder, nominees,
officers, agents or employees of the Trust, personally, but bind only the assets
and property of the Trust, as provided in the Master Trust Agreement. The
execution and delivery of this Agreement have been authorized by the Trustees
and signed by an authorized officer of the Trust, acting as such, and neither
such authorization nor such execution and delivery shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the assets and property of the Trust as provided
in the Master Trust Agreement. The Master Trust Agreement is on file with the
Secretary of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
Pauze' Funds
By: /S/
----------------------------------------------
Philip C. Pauze', President and Trustee
DECLARATION SERVICE COMPANY
By: /S/
----------------------------------------------
Terence P. Smith, President
<PAGE>
SCHEDULE A
PAUZE' FUNDS
Portfolio and Fee Schedule
Portfolios covered by Accounting Services Agreement:
PAUZE' U. S. GOVERNMENT TOTAL RETURN BOND FUND
Fees for accounting services on behalf of the Portfolios:
System set-up, conversion of records, Time & Materials
transfer of historical accounting data
and portfolio tax lots to
system.
Annual Fee, Accounting Services:
First Class of Shares, per portfolio ............ $22,000
Second Class of Shares, per portfolio ........... 15,000
Each additional Class, per portfolio ............ 10,000
Plus standard out-of-pocket expenses including (but not limited to): postage,
courier, telephone line, travel, price quotation services, Fund specific costs
related to Fund/SERV and Networking, printing, bank service charges, wire
charges, and other standard miscellaneous items.
<PAGE>
SCHEDULE B
Accounting Services Provided by Declaration Services Company
1. Journalize each Portfolio's investment, capital share and income and
expense activities;
2. Verify investment buy/sell trade tickets when received from the adviser and
transmit trades to the Fund's custodian for proper settlement;
3. Maintain individual ledgers for investment securities;
4. Maintain historical tax lots for each security;
5. Reconcile cash and investment balances of each Portfolio with the
custodian, and provide the adviser with the beginning cash balance
available for investment purposes;
6. Update the cash availability throughout the day as required by the adviser;
7. Post to and prepare each Portfolio's Statement of Assets and Liabilities
and Statement of Operations;
8. Calculate expenses payable pursuant to the Fund's various contractual
obligations;
9. Control all disbursements from the Fund on behalf of each Portfolio and
authorize such disbursements upon instructions of the Fund;
10. Calculate capital gains and losses;
11. Determine each Portfolio's net income;
12. At the Portfolio's expense, obtain security market prices or if such
market prices are not readily available, then obtain such prices from
services approved by the adviser, and in either case calculate the market
or fair value of each Portfolio's investments;
13. Where applicable, calculate the amortized cost value of debt instruments;
14. Transmit or mail a copy of the portfolio valuations to the adviser;
15. Compute the net asset value of each Portfolio;
16. Report applicable net asset value and performance data to performance
tracking organizations;
17. Compute each Portfolio's yields, total returns, expense ratios and
portfolio turnover rate;
18. Prepare and monitor the expense accruals and notify Fund management of any
proposed adjustments;
19. Prepare monthly financial statements, which will include, without
limitation, the Schedule of Investments, the Statement of Assets and
Liabilities, the Statement of Operations, the Statement of Changes in Net
Assets, the Cash Statement, and the Schedule of Capital Gains and Losses;
20. Prepare monthly security transactions listings;
21. Prepare monthly broker security transactions summaries;
22. Supply various Fund and Portfolio statistical data as requested on an
ongoing basis;
23. Assist in the preparation of support schedules necessary for completion of
Federal and state tax returns;
24. Assist in the preparation and filing of the Fund's annual and semiannual
reports with the SEC on Form N-SAR;
25. Assist in the preparation and filing of the Fund's annual and semiannual
reports to shareholders and proxy statement;
26. Assist with the preparation of amendments to the Fund's Registration
Statements on Form N-1A and other filings relating to the registration of
shares;
27. Monitor each Portfolio's status as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended from time to
time ("Code");
28. Determine the amount of dividends and other distributions payable to
shareholders as necessary to, among other things, maintain the
qualification as a regulated investment company of each Portfolio of the
Fund under the Code; and
29. Prepare monthly or quarterly reports of funds disbursed under the Fund's
Rule 12b-1 Plan(s); and
30. Provide other accounting services as may be agreed from time to time in
writing by the Fund and the Accounting Services Agent.
PAUZE' FUNDS
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT (the "Agreement") is made as of the 13th day
of February, 1996, by and between PAUZE' FUNDS (the "Fund"), a Massachusetts
Business Trust (the "Trust"), and DECLARATION SERVICE COMPANY (the
"Administrator"), a Pennsylvania corporation.
WITNESSETH THAT:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and is registering its shares of common stock under the Securities Act of 1933,
as amended (the "1933 Act") in one or more distinct series of shares (the
"Portfolio" or "Portfolios");
WHEREAS, the Fund and the Administrator desire to enter into this Agreement
pursuant to which the Administrator will provide administrative services to the
Portfolios of the Fund identified on Schedule A hereto, as may be amended from
time to time, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Fund and the Administrator, intending to be
legally bound hereby, agree as follows:
1. APPOINTMENT OF ADMINISTRATOR. The Fund hereby appoints the Administrator
to perform the services described in this Agreement for the Portfolios of the
Fund identified on Schedule A, and the Administrator hereby accepts such
appointment. The Administrator shall act under such appointment pursuant to the
terms and conditions hereinafter set forth.
2. FUND DOCUMENTS. The Fund has provided to the Administrator properly
certified or authenticated copies of the following Fund related documents in
effect on the date hereof: the Fund's organizational documents, including
Indenture of Trust and By-Laws; the Fund's Registration Statement on Form N-1A,
including all exhibits thereto; the Fund's Prospectus and Statement of
Additional Information; all contracts with the Fund's investment adviser,
custodian, transfer agent/shareholder servicing agent, distributor, accounting
services agent and custodian; if applicable, notice filed with or granted by the
Commodity Futures Trading Commission relating to the Fund's status as a
commodity pool operator; and resolutions of the Fund's Board of Trustees
authorizing the appointment of the Administrator and approving this Agreement
(members of the Board of Trustees being referred to herein as "Trustees"). The
Fund shall promptly provide to the Administrator copies, properly certified or
authenticated, of all additions, amendments or supplements to the foregoing, if
any.
3. ADMINISTRATIVE SERVICES. Subject to the direction and control of the
Board of Trustees of the Fund and to the extent not otherwise the responsibility
of, or provided by, the Fund or other agents of the Fund, the Administrator
shall provide the administrative services set forth on Schedule B hereto. The
Fund shall provide, and shall cause its investment adviser, custodian, transfer
agent/shareholder servicing agent, distributor, accounting services agent, legal
counsel and independent public accountants to cooperate with the Administrator
and to provide it with, such information, documents and advice as the
Administrator may reasonably request in order to enable the Administrator to
perform its duties hereunder. The Administrator shall provide office space,
facilities, equipment and personnel necessary to perform its obligations under
this Agreement.
4. ALLOCATION OF EXPENSES. The Administrator shall bear all costs and
expenses associated with its obligation to provide the office space, facilities,
equipment and personnel necessary to perform its duties under this Agreement,
including compensation of officers of the Fund who are affiliated persons of the
Administrator (if applicable). The Fund shall pay all its expenses other than
those expressly stated to be payable by the Administrator hereunder, which
expenses payable by the Fund shall include, without limitation: organizational
expenses; fees and expenses payable to the Fund's investment adviser, custodian,
transfer agent/shareholder servicing agent, distributor, accounting services
agent, legal counsel and independent public accountants; all documented
out-of-pocket expenses incurred by the Administrator in connection with the
provision of administrative services hereunder; the cost of obtaining quotations
for calculating the value of the assets of each Portfolio; taxes levied against
the Fund or any Portfolio; brokerage fees, mark-ups and commissions in
connection with the purchase and sale of Portfolio securities; costs, including
the interest expense, of borrowing money; costs and/or fees incident to holding
meetings of the Board of Trustees and shareholders; costs and/or fees related to
preparation (including typesetting and printing charges) and mailing of copies
of the Fund's Prospectus, Statement of Additional Information, reports and proxy
materials to the existing shareholders of the Fund and filing of reports with
regulatory bodies; costs and/or fees related to maintenance of the Fund's
corporate existence; costs and/or fees of initial and on-going registration of
shares with Federal and state securities authorities; costs of printing share
certificates representing shares of the Fund; fees payable to, and expenses of,
Trustees who are not "interested persons" of the Fund; premiums payable on the
fidelity bond required by Section 17(g) of the 1940 Act, and any other premiums
payable on insurance policies related to the Fund's business and the investment
activities of its Portfolios; fees, voluntary assessments and other expenses
incurred in connection with the Fund's membership in investment company
organizations; and such non-recurring expenses as may arise, including actions,
suits or proceedings to which the Fund is a party and the legal obligation which
the Fund may have to indemnify its Trustees and officers with respect thereto.
5. RECORDKEEPING AND OTHER INFORMATION. The Administrator shall create and
maintain all necessary records in accordance with all applicable laws, rules and
regulations, including, but not limited to, records required by Section 31(a) of
the 1940 Act and the rules thereunder, as the same may be amended from time to
time, relating to the various services performed by it and not otherwise created
and maintained by another party pursuant to a contract with the Fund. All
records shall be the property of the Fund at all times and shall be available
for inspection and use by the Fund. Where applicable, such records shall be
maintained by the Administrator for the periods and in the places required by
Rule 31a-2 under the 1940 Act.
6. AUDIT, INSPECTION AND VISITATION. The Administrator shall make available
during regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the Fund or
any person retained by the Fund. Upon reasonable notice by the Fund, the
Administrator shall make available during regular business hours its facilities
and premises employed in connection with its performance of this Agreement for
reasonable visitation by the Fund, or any person retained by the Fund.
7. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. Except as otherwise
provided herein, the Fund assumes full responsibility for ensuring that the Fund
complies with all applicable requirements of the 1933 Act, the Securities
Exchange Act of 1934, as amended, the 1940 Act, and the rules thereunder, and
any other applicable laws, rules and regulations.
8. COMPENSATION. The Fund shall pay to the Administrator as compensation
for its services rendered hereunder the annual fee set forth in Schedule A. The
fee shall be calculated and accrued daily, and paid monthly. The Fund shall also
reimburse the Administrator for its out-of-pocket expenses related to the
performance of its duties hereunder, including, without limitation,
telecommunications charges, postage and delivery services, record retention
costs, reproduction charges and traveling and lodging expenses incurred by
officers and employees of the Administrator. The Fund shall pay the
Administrator's monthly invoices for administration fees and out-of-pocket
expenses within five days of the respective month-end. If this Agreement becomes
effective subsequent to the first day of a month or terminates before the last
day of a month, the Fund shall pay to the Administrator an administration fee
that is prorated for that part of the month in which this Agreement is in
effect. All rights of compensation and reimbursement under this Agreement for
services performed by the Administrator as of the termination date shall survive
the termination of this Agreement.
9. APPOINTMENT OF AGENTS. The Administrator may at any time or times in its
discretion appoint (and may at any time remove) other parties as its agent to
carry out such provisions of this Agreement as the Administrator may from time
to time direct; provided, however, that the appointment of any such agent shall
not relieve the Administrator of any of its responsibilities or liabilities
hereunder.
10. USE OF ADMINISTRATOR'S NAME. The Fund shall not use the name of the
Administrator or any of its affiliates in the Prospectus, Statement of
Additional Information, sales literature or other material relating to the Fund
in a manner not approved prior thereto in writing by the Administrator;
provided, however, that the Administrator shall approve all uses of its and its
affiliates' names that merely refer in accurate terms to their appointments
hereunder or that are required by the Securities and Exchange Commission (the
"SEC") or any state securities commission; and further provided, that in no
event shall such approval be unreasonably withheld.
11. USE OF FUND'S NAME. Neither the Administrator nor any of its affiliates
shall use the name of the Fund or material relating to the Fund on any forms
(including any checks, bank drafts or bank statements) for other than internal
use in a manner not approved prior thereto in writing by the Fund; provided,
however, that the Fund shall approve all uses of its name that merely refer in
accurate terms to the appointment of the Administrator hereunder or that are
required by the SEC or any state securities commission; and further provided,
that in no event shall such approval be unreasonably withheld.
12. LIABILITY OF ADMINISTRATOR. The duties of the Administrator shall be
limited to those expressly set forth herein, and no implied duties are assumed
by or may be asserted against the Administrator hereunder. The Administrator
may, in connection with this Agreement, employ agents or attorneys in fact, and
shall not be liable for any loss arising out of or in connection with its
actions under this Agreement so long as it acts in good faith and with due
diligence, and is not negligent or guilty of any willful misconduct. The
Administrator may consult counsel to the Fund or the Fund's independent public
accountants or other experts with respect to any matter arising in connection
with the Administrator's duties, and the Administrator shall not be liable for
any action taken or omitted by the Administrator in good faith in reliance on
the oral or written advice of such counsel, independent public accountants or
other experts. The Administrator shall not be liable for any action taken or
omitted by the Administrator in reliance on the oral or written instruction,
authorization, approval or information provided to the Administrator by any
person reasonably believed by the Administrator to be authorized by the Fund to
give such instruction, authorization, approval or information. The Administrator
shall not be liable or responsible for any acts or omissions of any predecessor
administrator or any other persons having responsibility for matters to which
this Agreement relates prior to the effective date of this Agreement nor shall
the Administrator be responsible for reviewing any such acts or omissions. Any
person, even though also an officer, trustee, employee or agent of the
Administrator or any of its affiliates, who may be or become an officer or
Trustee of the Fund, shall be deemed, when rendering services to the Fund as
such officer or Trustee, to be rendering such services to or acting solely for
the Fund and not as an officer, trustee, employee or agent or one under the
control or direction of the Administrator or any of its affiliates, even though
paid by one of those entities. As used above in this Section 12 (except the
previous sentence) and in Section 13, the term "Administrator" shall include
trustees, officers, employees and other agents of the Administrator.
13. INDEMNIFICATION. The Trust hereby agrees to indemnify and hold harmless
the Administrator from and against any and all claims, demands, expenses
(including attorney's fees) and liabilities whether with or without basis in
fact or law, of any and every nature which the Administrator may sustain or
incur or which may be asserted against the Administrator by any person by reason
of, or as a result of: (i) any action taken or omitted to be taken by the
Administrator in good faith reliance upon any instrument, order or communication
believed by it to be genuine and to be signed, countersigned or executed by any
duly authorized person, upon the oral instruction or written instruction of an
authorized person of the Trust or upon the opinion of legal counsel for the
Trust or its own counsel; or (ii) any action taken or permitted to be taken by
the Administrator in connection with its appointment in good faith in reliance
upon any law, act, regulation or interpretation of the same even though the same
may thereafter have been altered, changed, amended or repealed. However,
indemnification hereunder shall not apply to actions or omissions of the
Administrator or its directors, officers, employees, or agents in cases of its
own negligence, willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder. The right to indemnity hereunder shall include the
right to advancement of defense expenses in the event of any pending or
threatened litigation; provided, however, that the Administrator shall agree
that any advancement of expenses shall be returned to the Fund if it is
ultimately determined by an administrative or judicial tribunal that the
expenses (and related liability, if any) resulted from the Administrator's own
wilful misfeasance, bad faith, gross negligence or reckless disregard of its
duties and obligations under this Agreement.
The Administrator shall give prompt written notice to the Fund of a written
assertion or claim of any threatened or pending legal proceeding which may be
subject to indemnity under this Section; provided, however, that the
Administrator's failure to notify the Fund of such threatened or pending legal
proceeding shall not operate to relieve the Fund of any liability arising
hereunder. The Fund shall be entitled, if it so elects, to assume the defense of
any claim subject to this Indemnity and such defense shall be conducted by
counsel chosen by the Fund and satisfactory to the Administrator; provided,
however, that if the defendants include both the Administrator and the Fund, and
the Administrator shall have reasonably concluded that there may be one or more
legal defenses available to it which are different from or additional to those
available to the Fund ("conflict of interest"), the Fund shall not have the
right to elect to defend the claim on behalf of the Administrator, and the
Administrator shall have the right to select separate counsel to defend such
claim on behalf of the Administrator. In the event that the Fund elects to
assume the defense of any claim pursuant to the preceding sentence and retains
counsel satisfactory to the Administrator, the Administrator shall bear the fees
and expenses of additional counsel retained by it, except for reasonable
investigation costs which shall be borne by the Fund. If the Fund (i) does not
elect to assume the defense of a claim, (ii) elects to assume the defense of a
claim but chooses counsel that is not satisfactory to the Administrator, or
(iii) has no right to assume the defense of a claim because of a conflict of
interest, the Fund shall advance or reimburse the Administrator, at the election
of the Administrator, reasonable fees and expenses of any counsel retained by
the Administrator, including reasonable investigation costs.
14. SCOPE OF DUTIES. The Administrator and the Fund shall regularly consult
with each other regarding the Administrator's performance of its obligations and
its compensation under the foregoing provisions. In connection therewith, the
Fund shall submit to the Administrator at a reasonable time in advance of filing
with the SEC copies of any amended or supplemented Registration Statement of the
Fund (including exhibits) under the 1940 Act and the 1933 Act, and, at a
reasonable time in advance of their proposed use, copies of any amended or
supplemented forms relating to any plan, program or service offered by the Fund.
Any change in such materials that would require a change in the Administrator's
obligations under this Agreement shall be subject to the Administrator's
approval. In the event that a change in such documents or in the procedures
contained therein increases the cost or burden to the Administrator of
performing its obligations hereunder, the Administrator shall be entitled to
receive reasonable compensation therefor.
15. DURATION. This Agreement shall become effective on the date first
written above and shall continue in force for two years from that date (the
"Initial Term"). Thereafter, this Agreement shall continue in force from year to
year (each a "Successive Term"), provided continuance after the Initial Term is
approved at least annually by (i) the vote of a majority of the Trustees of the
Fund and (ii) the vote of a majority of those Trustees of the Fund who are not
"interested persons" of the Fund, and who are not parties to this Agreement or
"interested persons" of any such party, cast at a meeting called for the purpose
of voting on the approval.
16. TERMINATION. This Agreement shall terminate as follows:
a. This Agreement shall terminate automatically in the event of its
assignment.
b. Either the Fund or the Administrator may terminate this Agreement
without penalty prior to the commencement of any Successive Term by
providing to the other party 90 days prior written notice of such
termination.
c. Either party (the "terminating party") may immediately terminate
this Agreement during the Initial Term or any Successive Term in the event
of a material breach of this Agreement by the other party (the "breaching
party"), provided that the terminating party has given to the breaching
party notice of such breach, and the breaching party has not remedied such
breach within 45 days after receipt of such notice.
Upon the termination of this Agreement, the Fund shall pay to the
Administrator such compensation and out-of-pocket expenses as may be payable for
the period prior to the effective date of such termination. In the event that
the Fund designates a successor to any of the Administrator's obligations
hereunder, the Administrator shall, at the expense and direction of the Fund,
transfer to such successor all relevant books, records and other data
established or maintained by the Administrator under the foregoing provisions.
Sections 4, 8, 10, 11, 12, 13, 16, 17, 21, 22, 23, 24 and 25 shall survive
any termination of this Agreement.
17. FORCE MAJEURE. The Administrator shall not be liable for any delays or
errors in the performance of its obligations hereunder occurring by reason of
circumstances not reasonably foreseeable and beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot or
failure of communications or power supply. In the event of equipment breakdowns
which are beyond the reasonable control of the Administrator and not primarily
attributable to the failure of the Administrator to reasonably maintain or
provide for the maintenance of such equipment, the Administrator shall, at no
additional expense to the Fund, take reasonable steps in good faith to minimize
service interruptions, but shall have no liability with respect thereto.
18. AMENDMENT. The terms of this Agreement shall not be waived, altered,
modified, amended or supplemented in any manner whatsoever except by a written
instrument signed by the Administrator and the Fund.
19. NON-EXCLUSIVE SERVICES. The types of administrative services rendered
by the Administrator hereunder are not exclusive. The Administrator may render
such services to any other investment company and have other businesses and
interests.
20. DEFINITIONS. As used in this Agreement, the terms "assignment" and
"interested person" shall have the respective meanings set forth in the 1940 Act
and the rules enacted thereunder as now in effect or hereafter amended.
21. CONFIDENTIALITY. The Administrator shall treat confidentially and as
proprietary information of the Fund all records and other information related to
the Fund and prior, present or potential shareholders and shall not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except as may be required by
administrative or judicial tribunals or as requested by the Fund.
22. NOTICE. Any notices and other communications required or permitted
hereunder shall be in writing and shall be effective upon delivery by hand or
upon receipt if sent by certified or registered mail (postage prepaid and return
receipt requested) or by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or upon transmission if sent by
telex or facsimile (with request for immediate confirmation of receipt in a
manner customary for communications of such respective type and with physical
delivery of the communication being made by one or the other means specified in
this Section 22 as promptly as practicable thereafter). Notices shall be
addressed as follows:
(a) if to the Fund:
Pauze' Funds
C/O Pauze' Capital Management Co.
14340 Torrey Chase Blvd., Suite 170
Houston, TX 77014-1024
ATTN: Mr. Philip C. Pauze'
President and Trustee
(b) if to the Administrator:
Declaration Service Company
Suite 6160
555 North Lane
Conshohocken, PA 19428
Attn: Mr. Terence Smith, President
or to such other respective addresses as the parties shall designate by like
notice, provided that notice of a change of address shall be effective only upon
receipt thereof.
23. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
24. GOVERNING LAW. This Agreement shall be administered, construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania to the
extent that such laws are not preempted by the provisions of any law of the
United States heretofore or hereafter enacted, as the same may be amended from
time to time.
25. ENTIRE AGREEMENT. This Agreement (including the Exhibits attached
hereto) contains the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersedes all prior written or oral
agreements and understandings with respect thereto.
26. MISCELLANEOUS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction. This Agreement may be executed in two counterparts,
each of which taken together shall constitute one and the same instrument.
27. LIMITATION OF LIABILITY. The term "Pauze' Funds" means and refers to
the Trustees from time to time serving under the Master Trust Agreement of the
Trust dated October 15, 1993, as the same may subsequently thereto have been, or
subsequently hereto be, amended. It is expressly agreed that obligations of the
Trust hereunder shall not be binding upon any Trustee, Shareholder, nominees,
officers, agents or employees of the Trust, personally, but bind only the assets
and property of the Trust, as provided in the Master Trust Agreement. The
execution and delivery of this Agreement have been authorized by the Trustees
and signed by an authorized officer of the Trust, acting as such, and neither
such authorization nor such execution and delivery shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the assets and property of the Trust as provided
in the Master Trust Agreement. The Master Trust Agreement is on file with the
Secretary of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
PAUZE' FUNDS
By: /S/
---------------------------------------
Philip C. Pauze', President and Trustee
DECLARATION SERVICE COMPANY
By: /S/
---------------------------------------
Terence P. Smith, President
<PAGE>
SCHEDULE A
PAUZE' FUNDS
Portfolio and Fee Schedule
Portfolios covered by Administration Agreement:
PAUZE' U. S. GOVERNMENT TOTAL RETURN BOND FUND
Fees for administrative services on
behalf of the Portfolios:
System set-up, conversion of records Time & Materials
transfer of historical records, permits, etc.
to Declaration Group systems.
Annual Fee, Administrative Services:
First Class of Shares, per portfolio ....................... $24,000
Second Class of Shares, per portfolio ...................... 16,000
Each additional Class, per portfolio ....................... 12,000
Plus standard out-of-pocket expenses including (but not limited to): postage,
courier, telephone, travel, Fund specific costs related to Fund/SERV and
Networking, printing, copying, and other standard miscellaneous items.
<PAGE>
SCHEDULE B
Administrative Services Provided by Declaration Services Company
1. Provide overall day-to-day Fund administrative management, including
coordination of investment adviser, custodian, transfer agency, distribution,
and pricing and accounting activities.
2. Assist the Fund and Fund counsel with the design and development of the
Fund, including investment objectives, policies and structure of new Portfolios.
3. Assist Fund counsel with the preparation of Registration Statements,
Prospectuses, Statements of Additional Information, and proxy materials.
4. Prepare and file such reports, applications and documents as may be
necessary or desirable to register the Fund's shares with the Federal and state
securities authorities, and monitor the sale of Fund shares for compliance with
Federal and state securities laws;
5. Prepare and file Semi-Annual Report on Form N-SAR.
6. Prepare and file reports to shareholders, including the annual report to
shareholders, and coordinate mailing Prospectuses, notices, proxy statements,
proxies and other reports to shareholders.
7. Assist with layout and printing of shareholder communications, including
Prospectuses and reports to shareholders.
8. Administer contracts on behalf of the Fund with, among others, the
Fund's investment adviser, custodian, transfer agent/shareholder servicing
agent, distributor, and accounting services agent.
9. Coordinate the representations of outside legal counsel and independent
public accountants to the Fund.
10. Assist Fund in obtaining fidelity bond and trustees and officers/errors
and omissions insurance policies for the Fund in accordance with the
requirements of Rules 17g-1 and 17d-1(7) under the 1940 Act, as such bonds and
policies are approved by the Fund's Board of Trustees.
11. Prepare and maintain materials for trustees/management meetings
including, agendas, minutes, attendance records and minute books.
12. Coordinate shareholder meetings, including assisting Fund counsel in
preparation of proxy materials, preparation of minutes and tabulation of
results.
13. Monitor and pay Fund bills, maintain Fund budget and report budget
expenses and variances to Fund management.
14. Monitor the Fund's compliance with the investment restrictions and
limitations imposed by the 1940 Act and state Blue Sky laws and applicable
regulations thereunder, the fundamental and non-fundamental investment policies
and limitations set forth in the Fund's Prospectuses and Statement of Additional
Information, and the investment restrictions and limitations necessary for each
Portfolio of the Fund to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended, or any successor
statute.
15. Prepare and distribute to appropriate parties notices announcing the
declaration of dividends and other distributions to shareholders.
16. Provide personnel to serve as officers of the Fund if so elected by the
Board of Trustees of the Fund, and the Fund provides coverage for said officers
under the Fund's Directors and Officers and Errors and Omissions insurance.
17. Provide other administrative services as may be agreed from time to
time in writing by the Fund and the Administrator.
18. Assist in the preparation and filing of the Fund's annual report
pursuant to Rule 24f-2 of the Investment Company Act of 1940, as amended.
[PRICE-WATERHOUSE LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 5 to the Registration Statement on Form N-1A (the "Registration
Statement") of our report dated June 28, 1995, relating to the financial
statements and selected per share data and ratios appearing in the April 30,
1995 Annual Report of Pauze' U.S. Government Total Return Bond Fund, which is
also incorporated by reference into the Registration Statement. We also consent
to the references to us under the headings "Financial Highlights" and
"Independent Accountants" in the Prospectus and under the heading "Independent
Accountants" in the Prospectus and under the heading "Independent Accountants"
in the Statement of Additional Information.
/S/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Antonio, Texas
February 14, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The financial data schedule contains summary financial information extracted
from annual report and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 60598
<INVESTMENTS-AT-VALUE> 62491
<RECEIVABLES> 1073
<ASSETS-OTHER> 11
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 63575
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 112
<TOTAL-LIABILITIES> 112
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61880
<SHARES-COMMON-STOCK> 6487
<SHARES-COMMON-PRIOR> 3413
<ACCUMULATED-NII-CURRENT> 47
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (357)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1893
<NET-ASSETS> 63463
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1771
<OTHER-INCOME> 0
<EXPENSES-NET> 345
<NET-INVESTMENT-INCOME> 1426
<REALIZED-GAINS-CURRENT> (538)
<APPREC-INCREASE-CURRENT> 2225
<NET-CHANGE-FROM-OPS> 3113
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1376
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13353
<NUMBER-OF-SHARES-REDEEMED> 10407
<SHARES-REINVESTED> 128
<NET-CHANGE-IN-ASSETS> 31469
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 181
<OVERDISTRIB-NII-PRIOR> 3
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 109
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 345
<AVERAGE-NET-ASSETS> 58304
<PER-SHARE-NAV-BEGIN> 9.37
<PER-SHARE-NII> .23
<PER-SHARE-GAIN-APPREC> .40
<PER-SHARE-DIVIDEND> .22
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.78
<EXPENSE-RATIO> 1.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
